Sad claim I've seen from some libertarians who should know better:
"Trump's tariff is a good thing because it's a step towards replacing the income tax with tariffs".
Of course it's not, and that's a terrible idea anyway. As much as I sympathize with wanting to get rid of the income tax, tariffs are a far worse alternative.
Even if you somehow shrank total federal spending down to just one-tenth of what it is today (libertarian fantasyland, in other words), you'd still have to boost tariff revenues ten-fold from their current levels to pay for it. Which would come with a deadweight loss and negative growth impact several times the amount of revenue collected. It would kick off a real global trade war that would make Trump's one look like a friendly squirt-gun fight.
Tariffs "worked" as a primary revenue source in the 19th Century, not just because the federal government was far smaller back then, but because the world was also far poorer and less interconnected. And the world was far poorer and less interconnected, in no small part because of the proliferation of tariffs. Not just tariffs between nations, but internal ones too in much of the world. (That's why the angry Parisians who stormed the Bastille were starving.)
Other forms of taxes have their disadvantages. The income tax is intrusive in a way that libertarians particularly hate, and it gets shot through with special interest distortions. Sales taxes are regressive and can also suffer from special-interest carve-outs. Property taxes are often misaligned with ability to pay, and politics can complicate them with exemptions as well.
But they all leave the underlying price signals relatively intact compared to tariffs. Tariffs don't just take money from importers and consumers, they disrupt the very utility of money as a system for collecting, codifying, and transmitting distributed information. They play unique havoc on market forces, because of the way they impose a high rate on a narrow base. In the modern world they're as obsolete as demanding people pay their taxes in-kind with bales of tobacco.
Seems like a move that could be popular. Tariffs have been argued to bring jobs back to America. Income taxes are very unpopular right now. So lets have more jobs and less taxes because someone else is paying them for us.
Sad to say but this argument is quite weak. Tariffs will probably only bring jobs back that people don't want. Reduced income tax will not raise disposable income because of the inflation produced from the Tariffs. So really just going round in circles.
Normally tariffs produce more losers than winners. It is like penalising someone because they are good at something to give others, who are less capable, a chance. There is also the risk of retaliation in some form as well. Maybe Trump should read up about David Ricardo and comparative advantage.
I feel that taxes need to be kept to a minimum. Higher taxes diminishes the ability of the market to operate effectively. It also reduces freedom as the Government has more power to make decisions on our behalf.
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So we should just let the other countries continue to take advantage of us? Let's face it, previous administrations did not have our country's best interests in mind. God bless Trump for making America great again!
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I appreciate your opinion however I feel like you have a personal interest in this debate like it is hurting you badly. I sort of understand what your saying if you only look on one plane. In business, especially internationally there are many playing field levels and their may be much more going on than just rise in tariffs.
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