Trump's ‘All Tariff’ Proposal Might be His Most Evil Idea Yet

Donald Trump’s disastrous idea of replacing the federal income tax with a tariff would redistribute wealth upwards while likely necessitating devastating cuts to essential government programs.

Donald Trump is floating the idea of eliminating the federal income tax. In its place, he wants to implement an “all tariff policy,” according to a campaign source who recently spoke with CNBC. It’s an even more radical expansion of a policy Trump has already proposed publicly, to place a minimum 10-percent tariff on all imports to the United States, which would be used to finance more tax cuts that would disproportionately benefit the rich.

Right now, our tax system is filled with loopholes that allow the rich to avoid paying what they owe. (Trump already made it more so with his 2017 tax cuts.) But at the very least, the U.S. is supposed to have a progressive income tax system, in theory. Trump’s plan would effectively fulfill the long-standing conservative goal of doing away with progressive taxation as we know it.

As Jonathan Chait writes in New York magazine

[T]he rejection of progressive taxation on moral grounds remains a foundational tenet of American conservative thought. Conservatives have never stopped devising proposals to roll back progressive taxation, employing a wide array of creative ideas with varying levels of plausibility, from the utopian (the flat tax, the “fair tax,” Herman Cain’s 9/9/9 tax) to more banal proposals to slash or eliminate taxes on estates, capital gains, dividends, or the top income tax bracket.

These flat tax plans varied in their particulars, but the shared premise between all of them was that they would treat wealth identically at all income levels. This was sold as a means of making taxation “fairer,” but in practice, it would dramatically shift America’s tax burden away from the wealthy and onto the poor.

Americans fundamentally grasp that a person who brings in $400,000 a year can afford to lose a greater percentage of it than a person who makes $40,000 a year. And despite its branding as a fairer system, the flat tax has rightly never gained much mainstream traction outside of Republican policy circles. While it’s still quietly a core element of many national Republicans’ platforms, campaigning on the flat tax feels like a relic from the era when conservatives called the rich “makers” and the poor “takers.” At the end of the day, its central premise is that our tax system is too hard on the rich and not hard enough on everybody else, and that’s never going to be a winning argument. 

Trump’s tariffs, on the other hand, have a populist sheen to them. During his first term, his trade war with China was framed as a war to protect American factory workers and farmers from losing out to foreign competition. Even if his policies likely led more Rust Belt jobs to be lost than saved, he was nevertheless rewarded with working-class voters shifting Republican. 

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Trump seems to have learned that he can mask the taste of regressive policies by slathering them with magic Tariff Sauce. His “all tariff” policy doesn’t just replicate the flat tax, it is actually far more extreme. It effectively takes a progressive tax system and inverts it, leading the poorest Americans to pay the greatest percentage of their incomes. 

While tariffs are technically a tax on importers, businesses pass much of the cost on to consumers in the form of price hikes. Replacing income taxes with an “all tariff” policy would require the poorest Americans to pay a much greater percentage of their incomes in the form of higher prices. And like the first Trump trade war, it will surely invite retaliatory tariffs from China and other nations that will hurt American manufacturing and cost more jobs.1

The right-leaning Peterson Institute for International Economics estimates that the average American would pay an extra $1,700 per year as a result of Trump’s proposed 10 percent tariff on all products plus 60 percent tariff on Chinese goods, while Americans on the bottom half of the income spectrum would have their after-tax incomes reduced by about 3.5 percent. The liberal Center for American Progress puts the number closer to $1,500 per year, projecting increases to food, clothing, electronics, oil, cars, and nearly every other consumer product.

If the price of a banana, a shirt, or a car goes up, it goes up the same for everybody. If you’re wealthy, you can sweat paying a couple of thousand more a year on products, especially since it will be more than offset by the amount you’ll be saving from no longer having to pay income tax. But people on the lower end of the income spectrum will be paying that same cost. As Andrew Leahey writes in Forbes:

Such price hikes in everyday goods disproportionately impact low and middle-income households, because they are the consumers that spend the highest percentage of their income on consumable goods. This converts a progressive income tax—higher income folks pay a higher rate—into a regressive tax, akin to a sales tax. As such, in the near term, the only groups benefiting from the elimination of a broad-based income tax and the ratcheting up of tariffs are those folks at the higher end of the socioeconomic spectrum. 

In addition, Forbes estimates that getting rid of the federal income tax would require an 85 percent average tariff in order to match the amount of revenue brought in by the income tax. This is highly unlikely to be put in place, which means that massive cuts to government spending would become necessary. And given how Republicans typically conduct fiscal policy, it’s not like that money would come out of the defense budget. Instead, it would surely mean cuts to social programs like food stamps, Medicaid, and the Holy Grail of Conservative Cuts, Social Security— all of which would hurt the poor even more. 


“Protectionism” usually has a populist connotation in American politics, one that Trump successfully wielded to brand himself as a working-class hero in his first term, even while pushing policies that shifted wealth upwards. Trump’s trade war failed to bring back Rust Belt jobs as he promised, but he still gained votes there as a result. Now, he’s seemingly leaning on a set of policies with a pro-working class veneer to push what can only be described as a multi-front class war on behalf of the rich. 

Trump’s phony populism is one of the most dangerous things about him as a political figure. He has an uncanny ability to frame handouts to the rich as being beneficial to ordinary people. With respect to tariffs, “competition with China” is an effective smoke screen, because hurting an enemy can be portrayed as a victory even when the people cheering it on are being hurt too. 

We’ve seen him do this effectively while pushing other pro-rich policies too. When Trump tightened eligibility standards for food stamps, cutting millions of Americans off from the program, he claimed that those people had been “lifted off of welfare” as a result of his wonderful economy. (In fact, wages had remained stagnant and the poor became even worse off.) When Trump passed his massive tax cut in 2017, he talked about how it “slash[ed] [the typical family’s] tax bill in half.” In reality, this amounted to about $500 in savings for the bottom 60 percent of families and $60,000 in savings for the top 1 percent and permanent corporate tax cuts.2

As a branding exercise, Trump’s use of tariffs might be the perfect medicine to help a decades-old GOP policy dream go down more smoothly. It’s also easy to overlook considering his many other more overtly supervillainous agenda items, like deporting 15 million people, rounding the homeless up into tent cities, legalizing discrimination against trans people, and arresting his critics.

This tariff proposal should remind us of another, subtler danger of Trump. He has figured out a way to define himself as a crusader against the “elite,” while enacting an agenda to make them more powerful at the expense of everyone else. It demonstrates how “populism” from the right is always pseudo-populism. And a continued failure of our leaders to address the material crises in this country—wages that are insufficient, unaffordable housing, exorbitant healthcare costs, and so forth—means that pseudo-populists will continue to appeal to people, and our politics will continue to lurch further, dangerously, to the right.

notes

1. The conservative Tax Foundation estimated that the tariffs imposed during Trump’s first term would “reduce long-run GDP by 0.21 percent, wages by 0.14 percent, and employment by 166,000 full-time equivalent jobs. [...] Other countries imposed retaliatory tariffs on U.S. exports, which we estimate will further reduce U.S. GDP by 0.04 percent and eliminate 29,000 full-time equivalent jobs.”
2. This also doesn’t factor in the amount these families would have lost had Republicans successfully enacted the cuts to Medicare, Medicaid, and Social Security that then-House Speaker Paul Ryan proposed in order to “tackle the deficit.” This deficit was, of course, increased by the very same tax cuts they’d literally just passed!  

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