Well...an across-the-board tariff primarily hits consumption, especially of goods. The wealthy consume a lower %, can much more easily absorb a price increase anyway, and that % probably includes more services than direct goods like bananas. (Service prices would also go up, but by some diffuse amount less than 10% that's hard to game out.) And then there's a "rebate" to the rich in the form of tax cuts, so probably they end up better off anyway. Ergo - Latin - it helps entrench relative socioeconomic standing, which is what really matters even more than Number Go Up. Keeping the proles down is one way to prop up the rich, after all. To paraphrase Adam Serwer, "the taxation is the point". And to top it all off, you've got the veneer of populism via nostalgia for the days of Triangle Shirtwaist jobs - none of which will be worked by the rich anyway, so they're not worried about industrial backsliding.
I'm not saying it's a *good* plan, but it makes a sort of wicked sense. Buy Americana!
The problem is not that we import too much, but that we don’t export enough. As it is, about nine million US jobs are tied to exports (and those tend to be better paying jobs), and it could be a lot more.
This is a bad consequence of our gargantuan budget deficit, which sets off a row of fiscal and monetary dominoes that essentially enables and finances the trade deficit. To a large extent we “balance” our trade by exporting Treasury bills and newly printed dollars instead of products.
> The first Obama-Trump crossover voters I met in the 2016 cycle lived in Bucksport, Maine, and they told me they thought he would bring the town’s shuttered paper mill back to life by cracking down on imported paper from China. Trump won the town. The paper mill did not reopen, and in 2020, he won the town again.
The thing is, there are plenty of paper mills still operating in Maine. (I grew up there and have friends and family in the industry.) This just reinforces my view of Trump voters as people who want to blame their own failings and dissatisfactions on people who don't look like them.
A great explainer that reminded me of things I used to know!
I AM worried, I think like a lot of Americans, about imports from China, and especially the lack of safety and transparency of the products and the terrible environmental externalities that the Chinese government tolerates. It seems like there would be something for Trump to do there, get "tough on China" and criticize them for being dirty and dishonest or something like that.
I confess I felt a fear that it would step into the trap of saying, "I believe this is important and would be a winning issue for the Democrats if only they put it front and center and clearly explained it to the American people." It tiptoed around that but didn't go all in, for which I'm grateful.
There are a million things the Democrats can go after Trump and the Republicans about. Most of them are vital and, if the voters truly understood them, would build support for the Democrats. But they won't understand them because that's not the way politics works.
There are two key elements in communications during a political campaign: salience and breaking through the noise. You have to make an issue truly salient to voters somehow -- it has to grab their attention; they have to care about it. And you have to break through the noise of a million things going on in the political environment. You do it through brain-breaking repetition; you do it by simplifying it enough for people to get it instantly.
And ultimately, there's the "rule of three" (which I coined just now): you have to be prepared to highlight three, and only three, major arguments against your opponents, and have the discipline to hit those constantly and to downplay, if not ignore, everything else.
If we were to decide that tariffs is one of the Big Three, which one would we drop? Abortion? Threat to democracy? A booming economy? The spectacular narcissism of Trump?
I fear that threat to democracy, while good on the merits, may struggle on the politics for the marginal voters needed to retain in/bring into the Biden camp. Maybe something to do with health care if we insist on locking this on three? (Two or four should also be cromulent numbers here.)
I like the rule of three rule. But I think the tariffs can be rolled into one argument with the economy. So it'd be: abortion, threat to democracy, and economy is booming while Trump wants to raise the price of everything by 10%.
The problem with hitting Trump on inflation (via tariffs) is, beyond the fact that no one knows what a tariff is and why it's like a tax, people associate Biden and not Trump with inflation. Inflation and prices were low under Trump. How do you convince people that it would be different during a second Trump term?
You really want to take inflation as an issue off the table. I wouldn't talk about Trump's hypothetical plan on tariffs at all. Too much risk it can boomerang on you: "oh yeah? what about the price of eggs under Biden?"
Talking about the economy at all is going to invite rebuttals revolving inflation, the Trump 10% tax is just another tool in the box that can help Biden combat that attack and then pivot to how much better the economy is now.
Chinese political prisoners are going to be sewing soccer balls with their teeth whether we sell 'em cheeseburgers or not, so let's sell 'em cheeseburgers.
Since July or August? Big deal! We've had a lot more inflation than during that. Period. and I suspect the inflation he's talking about is also understated, the CPI or something. Go around and ask people whether their wages have kept up with inflation and see what they tell you.
You know, Nikki Haley sounds better and better each day. Somehow, in the last month, she has turned into the voice of reason in our national conversation. I never would have thought that would happen.
She's finally freeing herself to speak to just the 30% of the GOP electorate that supports her. Not a viable campaign strategy (because it turns out there wasn't in the first place) but it is a bit of a bright spot until Trump finally gobbles up the nomination in a few weeks.
Hum…would you still object if we called it a labor and environmental rights equalization tax? It’s cheaper to do business in China as environmental, OSHA, etc. protections are much weaker. A certain amount of “equalization tax” would make producing in the US price competitive even with out might higher environmental and labor standards.
On the environmental front, I'm guessing Matt would just advocate for a straight up direct tax on the emission of greenhouse gases and other pollutants, as he commonly does--regardless of who emits it or where the emission occurs.
I would argue that many conservatives, being lovers of nostalgia and of glorifying the past, actually WANT to return to a more primitive state economically and culturally. This is both because (1) they really don't realize how great they actually have it now in an economic sense, and (2) because of their deep resentment for LGBTQ+, feminism, minorities, Gen-Z, etc. they think they would prefer the trade off of living in a world with less if it meant they also didn't have to live with the people they hate.
I don’t think that’s true or the Trump base. They are nostalgic for a time where they perceive (correctly) that it was easier to be someone in the 10th or 20th percentile of ability.
Excellent presentation. Perhaps you could write a companion piece on Trump's former Special Trade Representative Robert Lighthizer's proposal to have variable tariffs depending on the size of the trade deficit - higher deficit higher tariffs (see his book, "No Trade is Free." Readers would be enlightened to understand that overall trade/current account deficits are a function of savings and investment imbalances and would not be moderated by tariffs. When investment is higher than savings a external current account deficit is recorded in the national account statistics. Lighthizer's tough approach on China has given him some credibility. But his economics are faulty and take us further down the value chain, as you suggest.
Many, if not most, voters seem to think tariffs are paid by either foreign actors or foreign governments. I think Trump might think that, too. If Biden wants this issue, he should avoid saying "tariff" as much as possible and say "higher taxes on purchases" and "higher grocery/cellphone/back-to-school clothes prices" as much as humanly possible.
We all agreed that those leftist weirdos were stupid when they talked about how awful it was that Americans can easily get bananas in January and for some reason it gets glossed over that this is basically Trump's trade policy.
(This may also, in an odd way, explain why the far left is seemingly willing to let Trump win to punish Biden for not following their stupid pro-Hamas agenda.)
I personally think that our politics (even to some extent on a global scale) is being reoriented away from the socialism-capitalism spectrum towards a wierdo-normie spectrum. The wierdos wanting of course strong-man authoritarianism, anti-science/anti-progress policies, economic regression, religious fundamentalism, conspiracy theory mania, and so on, which ends up being this wierd blend of the worst ideas of marxism and fascism blended together.
And the cement for this blob of wierdo nonsense would be hatred of America, and any nation built and sustained under liberal ideas.
Isn’t “tariffs act similarly to a consumption tax, which are good but can’t actually get passed, except popular” a strong argument in FAVOR of tariffs? Feels like in other contexts you would be arguing not to let the perfect (VAT) be the enemy of the good (tariffs) and do the popular good thing instead of the unpopular or impossible perfect thing.
Maybe I'm missing context, but it doesn't seem obvious to me. Like, it depends on what is and isn't similar. For instance, to take up the value chain argument, whereas a tariff raises costs of American exporters who pay for imported intermediate goods, and hits exporters of high-value, complicated goods hardest, it's not clear to me how a consumption tax would have that same dynamic/effect. Again, I'm really asking, and not trying to rebut for rebuttal's sake.
That’s a better tax allocation (if you accept the premise that tariffs are just disguised consumption taxes, which I am not sure I do as they have other bad features IMO).
Setting that aside (on the assumption that you like current or higher corporate taxes), seems like that would leave you arguing about the use of the revenue not arguing “tariffs bad”, since consumption taxes are a good and efficient way to raise the revenue on Matt’s light, though he wants to prioritize other stuff in the budget than lowering other taxes (which Republicans are going to try to do in all events regardless of revenue situation).
Right, I don’t think corporate taxes need to be cut further, and as Matt notes, a lot of the windfall from the tariffs will be captured by business owners in specific industries rather than Uncle Sam.
I'd also like to see more people talking about Project 2025's proposal to eliminate the Fed's dual mandate, focusing only on price stability and eliminating the full employment mandate. They say it's to reduce inflation, but we know it's to lower wages for their corporate donors. I could see this gaining traction in right-wing media because it's a fun conspiracy that they like.
And what's going to happen to grocery prices when Trump throws half of our agricultural workforce into relocation camps?
There's a reason they prefer to talk about trans folks ...
The Ohio thing is bad, but there are several places that have that policy for a long time, with Washington being the most famous in my region. I wonder how successful they can be by just pointing to those examples.
The sales tax _is_ regressive but everyone is used to it - status quo. There's a little support with a "sales tax holiday" near the end of summer for back-to-school stuff, but yeah, pretty regressive(but less distorting, as you say in another comment)
I think it's perfectly reasonable for Ohio to point to Texas as a state that makes this work, but it's _also_ reasonable for people to talk about how this will drive up costs for current Seniors who already don't pay (much) state income tax and now will pay this.
FWIW, the sales tax rate in Texas appears to be 6.25-8.25%, which is comparable to most places that have one in my experience (even a bit low). The property tax rate is high, although a handful of blue states are higher still (including the infamous NJ and Illinois).
I continue to think that taxes should be spread across a number of methods. Small to moderate sales tax, income tax, LVT, property tax, business tax, sin taxes, etc. Make it so that no single tax is big enough to cause distortions and people have an enormous reason to try to avoid them.
My dream is for taxes to be as boring as interest rates, where there's one base rate that we adjust upward or downward as appropriate to what the economic conditions merit, and what we want the government to provision. I've long accepted that this is just that, a dream that will never happen.
1) using such a complex series of maneuvers effectively requires such insider knowledge that I think it would massively advantage the wealthy over the normal person.
2) Contrary to point one, traditional IRAs are bad for people with very large amounts of money. Your turning investment returns from a capital gains tax rate to an income tax rate and that's a terrible trade off.
2) collapse the distinction between different types of retirement accounts and contribution amounts so that there is no 401k, ira, sep, etc.
3) cap the amount that can be in a retirement account and index that to something. Say 100x the median income (about 4 million right now).
4) after 3, remove the annual cap on what can be contributed. You want to contribute 4 million right now, sure. Anything over the cap though has to be withdrawn and taxes paid though.
Well...an across-the-board tariff primarily hits consumption, especially of goods. The wealthy consume a lower %, can much more easily absorb a price increase anyway, and that % probably includes more services than direct goods like bananas. (Service prices would also go up, but by some diffuse amount less than 10% that's hard to game out.) And then there's a "rebate" to the rich in the form of tax cuts, so probably they end up better off anyway. Ergo - Latin - it helps entrench relative socioeconomic standing, which is what really matters even more than Number Go Up. Keeping the proles down is one way to prop up the rich, after all. To paraphrase Adam Serwer, "the taxation is the point". And to top it all off, you've got the veneer of populism via nostalgia for the days of Triangle Shirtwaist jobs - none of which will be worked by the rich anyway, so they're not worried about industrial backsliding.
I'm not saying it's a *good* plan, but it makes a sort of wicked sense. Buy Americana!
The problem is not that we import too much, but that we don’t export enough. As it is, about nine million US jobs are tied to exports (and those tend to be better paying jobs), and it could be a lot more.
This is a bad consequence of our gargantuan budget deficit, which sets off a row of fiscal and monetary dominoes that essentially enables and finances the trade deficit. To a large extent we “balance” our trade by exporting Treasury bills and newly printed dollars instead of products.
> The first Obama-Trump crossover voters I met in the 2016 cycle lived in Bucksport, Maine, and they told me they thought he would bring the town’s shuttered paper mill back to life by cracking down on imported paper from China. Trump won the town. The paper mill did not reopen, and in 2020, he won the town again.
The thing is, there are plenty of paper mills still operating in Maine. (I grew up there and have friends and family in the industry.) This just reinforces my view of Trump voters as people who want to blame their own failings and dissatisfactions on people who don't look like them.
A great explainer that reminded me of things I used to know!
I AM worried, I think like a lot of Americans, about imports from China, and especially the lack of safety and transparency of the products and the terrible environmental externalities that the Chinese government tolerates. It seems like there would be something for Trump to do there, get "tough on China" and criticize them for being dirty and dishonest or something like that.
Good post; expertly written and well laid out.
I confess I felt a fear that it would step into the trap of saying, "I believe this is important and would be a winning issue for the Democrats if only they put it front and center and clearly explained it to the American people." It tiptoed around that but didn't go all in, for which I'm grateful.
There are a million things the Democrats can go after Trump and the Republicans about. Most of them are vital and, if the voters truly understood them, would build support for the Democrats. But they won't understand them because that's not the way politics works.
There are two key elements in communications during a political campaign: salience and breaking through the noise. You have to make an issue truly salient to voters somehow -- it has to grab their attention; they have to care about it. And you have to break through the noise of a million things going on in the political environment. You do it through brain-breaking repetition; you do it by simplifying it enough for people to get it instantly.
And ultimately, there's the "rule of three" (which I coined just now): you have to be prepared to highlight three, and only three, major arguments against your opponents, and have the discipline to hit those constantly and to downplay, if not ignore, everything else.
If we were to decide that tariffs is one of the Big Three, which one would we drop? Abortion? Threat to democracy? A booming economy? The spectacular narcissism of Trump?
I fear that threat to democracy, while good on the merits, may struggle on the politics for the marginal voters needed to retain in/bring into the Biden camp. Maybe something to do with health care if we insist on locking this on three? (Two or four should also be cromulent numbers here.)
I think tying the democracy issue to general Trump chaos and narcissism (puts self over constitution) is the general strategy there.
I could see that, something like saying that his ego makes him think he wants to be a king instead of a servant to the people.
My three:
-- Abortion
-- The economy is heading in the right direction; let's finish the job!
-- Trump is a narcissist who's only in it for himself and not for the American people.
Over and over over and over. Don't get distracted by other things.
I like the rule of three rule. But I think the tariffs can be rolled into one argument with the economy. So it'd be: abortion, threat to democracy, and economy is booming while Trump wants to raise the price of everything by 10%.
The problem with hitting Trump on inflation (via tariffs) is, beyond the fact that no one knows what a tariff is and why it's like a tax, people associate Biden and not Trump with inflation. Inflation and prices were low under Trump. How do you convince people that it would be different during a second Trump term?
You really want to take inflation as an issue off the table. I wouldn't talk about Trump's hypothetical plan on tariffs at all. Too much risk it can boomerang on you: "oh yeah? what about the price of eggs under Biden?"
Talking about the economy at all is going to invite rebuttals revolving inflation, the Trump 10% tax is just another tool in the box that can help Biden combat that attack and then pivot to how much better the economy is now.
Chinese political prisoners are going to be sewing soccer balls with their teeth whether we sell 'em cheeseburgers or not, so let's sell 'em cheeseburgers.
I see a Pulp Fiction quote, I reflexively upvote.
Since July or August? Big deal! We've had a lot more inflation than during that. Period. and I suspect the inflation he's talking about is also understated, the CPI or something. Go around and ask people whether their wages have kept up with inflation and see what they tell you.
Squarely aimed at the Biden re-election team. We can only hope that they are receptive.
You know, Nikki Haley sounds better and better each day. Somehow, in the last month, she has turned into the voice of reason in our national conversation. I never would have thought that would happen.
She's finally freeing herself to speak to just the 30% of the GOP electorate that supports her. Not a viable campaign strategy (because it turns out there wasn't in the first place) but it is a bit of a bright spot until Trump finally gobbles up the nomination in a few weeks.
Hum…would you still object if we called it a labor and environmental rights equalization tax? It’s cheaper to do business in China as environmental, OSHA, etc. protections are much weaker. A certain amount of “equalization tax” would make producing in the US price competitive even with out might higher environmental and labor standards.
On the environmental front, I'm guessing Matt would just advocate for a straight up direct tax on the emission of greenhouse gases and other pollutants, as he commonly does--regardless of who emits it or where the emission occurs.
And on the labor front, there's this famous post: https://slate.com/business/2013/04/international-factory-safety.html
I would argue that many conservatives, being lovers of nostalgia and of glorifying the past, actually WANT to return to a more primitive state economically and culturally. This is both because (1) they really don't realize how great they actually have it now in an economic sense, and (2) because of their deep resentment for LGBTQ+, feminism, minorities, Gen-Z, etc. they think they would prefer the trade off of living in a world with less if it meant they also didn't have to live with the people they hate.
I don’t think that’s true or the Trump base. They are nostalgic for a time where they perceive (correctly) that it was easier to be someone in the 10th or 20th percentile of ability.
Why would it be any different today than it ever was?
A time when being in the 10th percentile of ability didn't come with diabetes and/or an opioid addiction.
They came with rickets and alcoholism.
Excellent presentation. Perhaps you could write a companion piece on Trump's former Special Trade Representative Robert Lighthizer's proposal to have variable tariffs depending on the size of the trade deficit - higher deficit higher tariffs (see his book, "No Trade is Free." Readers would be enlightened to understand that overall trade/current account deficits are a function of savings and investment imbalances and would not be moderated by tariffs. When investment is higher than savings a external current account deficit is recorded in the national account statistics. Lighthizer's tough approach on China has given him some credibility. But his economics are faulty and take us further down the value chain, as you suggest.
Many, if not most, voters seem to think tariffs are paid by either foreign actors or foreign governments. I think Trump might think that, too. If Biden wants this issue, he should avoid saying "tariff" as much as possible and say "higher taxes on purchases" and "higher grocery/cellphone/back-to-school clothes prices" as much as humanly possible.
We all agreed that those leftist weirdos were stupid when they talked about how awful it was that Americans can easily get bananas in January and for some reason it gets glossed over that this is basically Trump's trade policy.
(This may also, in an odd way, explain why the far left is seemingly willing to let Trump win to punish Biden for not following their stupid pro-Hamas agenda.)
I personally think that our politics (even to some extent on a global scale) is being reoriented away from the socialism-capitalism spectrum towards a wierdo-normie spectrum. The wierdos wanting of course strong-man authoritarianism, anti-science/anti-progress policies, economic regression, religious fundamentalism, conspiracy theory mania, and so on, which ends up being this wierd blend of the worst ideas of marxism and fascism blended together.
And the cement for this blob of wierdo nonsense would be hatred of America, and any nation built and sustained under liberal ideas.
So basically Peronism?
this too.
Isn’t “tariffs act similarly to a consumption tax, which are good but can’t actually get passed, except popular” a strong argument in FAVOR of tariffs? Feels like in other contexts you would be arguing not to let the perfect (VAT) be the enemy of the good (tariffs) and do the popular good thing instead of the unpopular or impossible perfect thing.
Maybe I'm missing context, but it doesn't seem obvious to me. Like, it depends on what is and isn't similar. For instance, to take up the value chain argument, whereas a tariff raises costs of American exporters who pay for imported intermediate goods, and hits exporters of high-value, complicated goods hardest, it's not clear to me how a consumption tax would have that same dynamic/effect. Again, I'm really asking, and not trying to rebut for rebuttal's sake.
Some of the curious twists and turns in Matt's commentary on Trump's policies can be resolved by asking "And what does Biden believe about this?"
But Trump wants to use the tariff money to (partially) pay for a corporate tax cut, not expanded social programs
That’s a better tax allocation (if you accept the premise that tariffs are just disguised consumption taxes, which I am not sure I do as they have other bad features IMO).
Setting that aside (on the assumption that you like current or higher corporate taxes), seems like that would leave you arguing about the use of the revenue not arguing “tariffs bad”, since consumption taxes are a good and efficient way to raise the revenue on Matt’s light, though he wants to prioritize other stuff in the budget than lowering other taxes (which Republicans are going to try to do in all events regardless of revenue situation).
Right, I don’t think corporate taxes need to be cut further, and as Matt notes, a lot of the windfall from the tariffs will be captured by business owners in specific industries rather than Uncle Sam.
Matt's right, and Dems should not concede this issue.
Here in Ohio, the Republicans are talking about eliminating the income tax (presumably) in favor of hiking the sales tax. That's a straightforward tax cut for the rich and tax hike on the poor and middle class. I can't wait until seniors with fixed incomes hear about it. https://www.dispatch.com/story/news/politics/2024/01/23/ohio-republicans-propose-eliminating-state-income-tax-business-tax/72285903007/
I'd also like to see more people talking about Project 2025's proposal to eliminate the Fed's dual mandate, focusing only on price stability and eliminating the full employment mandate. They say it's to reduce inflation, but we know it's to lower wages for their corporate donors. I could see this gaining traction in right-wing media because it's a fun conspiracy that they like.
And what's going to happen to grocery prices when Trump throws half of our agricultural workforce into relocation camps?
There's a reason they prefer to talk about trans folks ...
Republicans don't want full employment because you can't have full employment and an industrial reserve army.
A price only mandate would also lower the wages of customers so that doesn’t make sense. I think it’s just goldbuggery and nothing more than that.
The Ohio thing is bad, but there are several places that have that policy for a long time, with Washington being the most famous in my region. I wonder how successful they can be by just pointing to those examples.
Texas has sales & property tax and no income tax.
The sales tax _is_ regressive but everyone is used to it - status quo. There's a little support with a "sales tax holiday" near the end of summer for back-to-school stuff, but yeah, pretty regressive(but less distorting, as you say in another comment)
I think it's perfectly reasonable for Ohio to point to Texas as a state that makes this work, but it's _also_ reasonable for people to talk about how this will drive up costs for current Seniors who already don't pay (much) state income tax and now will pay this.
FWIW, the sales tax rate in Texas appears to be 6.25-8.25%, which is comparable to most places that have one in my experience (even a bit low). The property tax rate is high, although a handful of blue states are higher still (including the infamous NJ and Illinois).
They give an exception for all agricultural usage, not just big ranches. I'm of several minds about this:
1) It actually directly benefits me via lower property taxes on some land I own that is leased agricultural. So I'm biased in favor.
2) It theoretically protects doing more agriculture here - if you think that is valuable, then it can be worth it.
3) Sometimes it seems too easy to get the exemption even for not really doing all that much agricultural.
4) The land value is partly higher _because_ of this exemption, so just turning it off would seem to equalize things nicely.
I would probably support removing it because I try to support good tax policy, but I'm very much open to reasons not to since it helps me.
And your city in particular is perfectly located to leverage all the tax favorability.
I continue to think that taxes should be spread across a number of methods. Small to moderate sales tax, income tax, LVT, property tax, business tax, sin taxes, etc. Make it so that no single tax is big enough to cause distortions and people have an enormous reason to try to avoid them.
Heh, I'm the complete opposite on this, and I know I'm in the minority on this among Slow Borers.
I know that you don't like pigouvian taxes, but is there a distaste for otherwise spreading out taxation across different forms?
My dream is for taxes to be as boring as interest rates, where there's one base rate that we adjust upward or downward as appropriate to what the economic conditions merit, and what we want the government to provision. I've long accepted that this is just that, a dream that will never happen.
A VAT could work this way, maybe.
Two things with this
1) using such a complex series of maneuvers effectively requires such insider knowledge that I think it would massively advantage the wealthy over the normal person.
2) Contrary to point one, traditional IRAs are bad for people with very large amounts of money. Your turning investment returns from a capital gains tax rate to an income tax rate and that's a terrible trade off.
I think we should incentivize investment. Maybe just a 5% cut on the equivalent amount of tax on income, but think it should be lower.
There is a completely opposite idea now floating around right-wing circles to tax 401k and IRA contributions as a way to shore-up future Social Security tax revenue: https://www.aei.org/research-products/report/the-case-for-using-subsidies-for-retirement-plans-to-fix-social-security/
They should
1) do away with Roths
2) collapse the distinction between different types of retirement accounts and contribution amounts so that there is no 401k, ira, sep, etc.
3) cap the amount that can be in a retirement account and index that to something. Say 100x the median income (about 4 million right now).
4) after 3, remove the annual cap on what can be contributed. You want to contribute 4 million right now, sure. Anything over the cap though has to be withdrawn and taxes paid though.
A) Isn't that why the yearly contribution limit to Roth IRAs is so low?
B) If we are going to tax Roth IRA withdrawals then why have them separate from regular IRAs?