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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Trump Just Attacked Labor Again – His Target This Time Is The Firefighters Union

President Donald Trump loves to profess his love for the American worker. It’s all he talked about, other than about Hillary, during his presidential campaign.

But time and time again, Trump has shown his true colors by giving billions to his rich buddies while lashing out at the labor movement.

His latest attack happened today as he took to Twitter – not surprisingly, it happened a few hours after the International Association of Fire Fighters endorsed Joe Biden.

Donald J. Trump

@realDonaldTrump

The Dues Sucking firefighters leadership will always support Democrats, even though the membership wants me. Some things never change!

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USPS Cuts 10K Positions After Five Years of Job Growth

 

Brynn Anderson / AP

USPS employed 634,000 people last fiscal year, according to a financial analysis released by the Postal Regulatory Commission on Monday, its lowest total since fiscal 2015. While the cash-strapped agency has trended toward a smaller workforce over the last two decades—it has slashed 300,000 career workers since 1999—its total number of employees has inched up each year since fiscal 2013.

The Postal Service has in recent years increasingly relied on non-career workers, such as postal support employees and mailhandler assistants, as a cheaper alternative to reduce labor costs as part of efforts to keep pace with shrinking mail revenue. The agency’s non-career staff had grown each year since fiscal 2010, increasing more than 60% by fiscal 2017. Even that cadre of employees shrunk last year, however, dropping by 4,000 employees.

 

USPS lost a net of $3.9 billion in fiscal 2018, despite seeing revenues increase by $1 billion. That included expenses outside of management’s control, such as funding for future retiree health benefits, as well as “controllable losses” from growing operational costs. Fiscal 2017 marked the first time in five years that the Postal Service failed to turn a profit on controllable operations.

Dave Partenheimer, a USPS spokesman, said the workforce cuts last year were necessary to fit with the agency’s new reality.

“Simply put, our workforce decreased to align with changes in mail volume,” Partenheimer said. He declined to predict whether there will be additional losses for the current fiscal year.

In an unusual move for the Postal Service in recent years, it made $1.8 billion in repayments on its $15 billion debt to the U.S. Treasury in fiscal 2018. It marked the first time since fiscal 2011 the Postal Service made such payments. PRC, the USPS regulator, said the mailing agency’s liquidity improved because it has not made payments toward its Retiree Health Benefits Fund since fiscal 2010. It has also declined to make required payments toward its unfunded pension liabilities.

USPS’ current liabilities total $89.3 billion, PRC said, dwarfing its $26.7 billion in assets.

While normal, first-class mail revenue continues to drop precipitously, overall revenues have grown as shipping and package income has surged. That has led, however, to a corresponding increase in transportation and labor costs. While the workforce shrunk year-over-year in fiscal 2018, total personnel costs grew by $1.7 billion. PRC also cautioned that the rate of growth in that sector is starting to decline.

Postal management is expecting some relief in 2019. The PRC approved new postal rates this year, allowing USPS to increase the cost of a stamp by 5 cents and raise the cost of its offerings across the board by an average of 2.5%. Those changes, according to Chief Financial Officer Joe Corbett, would have added nearly $1.7 billion in revenue if they were in place during fiscal 2018.

President Trump has proposed a $98 billion savings package through a slew of legislative reforms. In addition to a renewed push for offering postal employees lower pay and benefits, Trump has pushed changes recommended by the task force he created last year. Those include raising prices for mail and packages not deemed “essential,” reducing delivery frequency, outsourcing some mail processing and licensing access to individuals’ mailboxes.

 

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