Trump’s tariffs are equivalent to one of the largest tax increases in decades

Key Points
  • The combined $72 billion in revenue from all the president’s tariffs ranks as one of the biggest tax increases since 1993, according to CNBC analysis of data from the Treasury Department.
  • The tariff revenue ranks as the largest increase as a percent of GDP since 1993 when compared with the first year of all the revenue measures enacted since then, according to the data.
  • But there are key differences between a tax cut and tariffs.

 

Here’s how the Trump tariffs would rank if they were considered tax hikes
President Donald Trump, having championed one of the larger tax cuts in recent years, has now enacted tariffs equivalent to one of the largest tax increases in decades.

A CNBC analysis of data from the Treasury Department ranks the combined $72 billion in revenue from all the president’s tariffs as one of the biggest tax increases since 1993. In fact, the tariff revenue ranks as the largest increase as a percent of GDP since 1993 when compared with the first year of all the revenue measures enacted since then, according to the data.

Only the revenue raised in the fourth year of the Affordable Care Act is greater, but not by much.

The nonpartisan Tax Foundation estimates all the tariffs enacted by the president, including the latest increase from 10% to 25% on $200 billion on Chinese goods, will raise $72 billion in revenue, equal to 0.34% of U.S. gross domestic product. Revenue raised in the first year of the 1993 budget and reconciliation act equaled 0.36% of GDP.

“It’s certainly not the largest tax increase in history but it does rank among some of the bigger tax proposals over the last 20 years that have raised revenues,″ said Kyle Pomerleau, chief economist with the Tax Foundation.

The revenue raised from the tariffs is more than the tax increases from the first three years of the Obama administration’s ACA, according to the Treasury data. Only in year four of the ACA, when revenue rose by an estimated 0.46% of GDP, did it raise more than the estimate from Trump’s tariffs.

Key differences

Of course, there are key differences between a tax cut and tariffs.

Trump says Chinese companies pay the tariffs, but most economists see them being borne by U.S. businesses and consumers. That is, they are essentially a tax increase. Over time, however, consumers and businesses can reduce this tax hit by substituting away from high-priced goods and Chinese production. Some of that production could come back to the U.S. or simply move to other countries.

Kent Smetters of the Penn-Wharton Budget Model and a former Treasury official during the Bush administration, estimates that the tariff increase will cost the median U.S. household with earnings of $61,000 about $500 to $550 a year. It’s the equivalent, he said, of raising the Social Security retirement tax by 1 percentage point to 11.6%.

Such a large revenue measure, according to Pomerleau, if it were a tax, would have been subject to considerable economic analysis from the Congressional Budget Office or the Joint Committee on Taxation for the potential effects on growth, inflation and jobs. No such analysis has been offered or is believed to have been conducted by the administration regarding the current tariffs.

And the revenue measure is by far the largest enacted without congressional approval. Congress, in a series of laws, has ceded to the president vast powers to levy tariffs.

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Tony D. McKinnon Sr. announces his candidacy for APWU National President

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BREAKING NEWS: The movement has begun!

APWU workers for change, these words are not a slogan nor are they a team but a movement for workers in the plants, stations, MVS, Maintenance, Support Services and small offices. APWU workers for change stands for the most important part of the union YOU THE MEMBER.

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Bipartisan legislation introduced to repeal USPS pre-funding mandate

Close-up of the Capitol’s dome with the US flag
On April 28, Reps. Peter DeFazio (D-OR), Tom Reed (R-NY), Xochitl Torres Small (D-NM), and Brian Fitzpatrick (R-PA) introduced the USPS Fairness Act (H.R. 2382) which would repeal the mandate that USPS “pre-fund” decades’ worth of health benefits for its future retirees, enacted through the Postal Accountability and Enhancement Act (PAEA) of 2006.As letter carriers know, the pre-funding mandate has cost an average of $5.4 billion annually since 2007 and is responsible for 92 percent of USPS losses over the last twelve years, and 100 percent of losses over the past six years. Were this burden not imposed, USPS would have recorded surpluses of nearly $4.0 billion since 2013.

Instead, the mandate has prevented the Postal Service from properly investing in its networks and infrastructure since it was enacted and even worse, the resulting financial losses are still used to both threaten core services that Americans rely on — such as door-to-door service, six-day delivery, and convenient post office hours – and to advance proposals to privatize the Postal Service and attack the jobs and rights of America’s postal employees.

As the heart of a $1.4 trillion mailing industry that employs 7.5 million Americans, the Postal Service links more than 159 million American households and businesses to each other seven days a week. It is essential to our nation’s voting systems and to multiple industries, communities and populations, including e-commerce; prescription drugs; the nation’s paper, publishing, and advertising businesses; and to millions of small businesses and tens of millions of citizens in rural, suburban, and urban communities across the country.

“NALC applauds Reps. DeFazio, Reed, Torres Small, and Fitzpatrick for introducing this bipartisan legislation as a crucial first step toward bringing financial stability to the most trusted and highest-rated agency in the federal government,” said NALC President Fredric Rolando. “The USPS is a national treasure and an essential part of the nation’s economic infrastructure. Congress caused this crisis when it passed the PAEA in 2006 and Congress can begin to fix it by passing the USPS Fairness Act.”

Should this legislation progress through the House and Senate, and then be signed into law, it will significantly improve the financial situation at the Postal Service. NALC is committed to working with Congress on any and all options that can bring financial stability to this agency so that it can then focus on much needed improvements to its networks and infrastructure (i.e. fleet replacement), as well as developing new and existing products and services.

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