No. of Recommendations: 8
Mungofitch:
the already very large rise in the weighted average US tariff rate will undoubtedly reduce both US imports AND exports, making the US poorer.
Meanwhile elsewhere you have pointed out that a tariff is just a sales tax on imports, or did you say imports and exports? It is obvious it is a sales tax on imports, would be interested in how it is a sales tax on exports if is a claim I remembered correctly.
My question is: if tariffs are a sales tax, are they any worse or better than other sales taxes on other things? That is, if we want to raise $100billion in taxes, do we expect a worse result if we do it with tariffs than if we do it with a more universally applied sales tax?
I ask because we already use (perhaps sub-optimally, but I think not horribly so) sales taxes to raise revenues and we already know we need to raise revenues to stem at least some of the gusher of blood we call a deficit. And we already do at least some fine-tuning of sales taxes to achieve other goals than pure revenue raising, such as luxury taxes (presumably to give a slight redistribution) and high taxes on at least some unhealthy things like alcohol and tobacco.
So if we want to raise $200 billion, and we can either 1) put tariffs on imports that raise $200 billion or 2) put sales taxes broadly that raise $200 billion, is it obvious that in terms of unwanted side effects, one is worse than the other? Both remove $200 billion of buying power to 0th order. Both remove that buying power in larger proportion from people who buy more stuff, so both probably slightly increase savings/investment?
The question seems important because many of us, certainly me, would like to see revenues increased by as much as a Trillion, but not at the expense of DCF future GDP of more than a Trillion, that is, we want to keep the benefit of paying off debt with higher revenue streams. And it is not obvious that tariffs are any worse than any other choice for raising revenues. But if they are worse, I would like to know that.
Yours,
R:)
