WASHINGTON ― Attention Walmart Shoppers: That $18.99 flannel shirt in stores today could soon cost $36.99.
That $69 single-serving Keurig coffee maker could jump to $135. And that $489 PlayStation 5? How does $954 sound?
Such would be the hyperinflation caused by Donald Trump’s goal to eliminate the income tax and replace it with tariffs, which, in addition to causing a global recession, would also radically shift the tax burden in this country away from the richest upper-middle class and onto the lower-middle class and poor.
“Yeah, sure, why not,” Trump said in his Friday interview with podcaster Joe Rogan, when asked if he was serious about his proposal. The Republican presidential nominee then went on to praise the 1890s, as he has done repeatedly of late, as American’s golden age because tariffs were so high.
“We will not allow the enemy to come in and take our jobs and take our factories and take our workers and take our families unless they pay a big price, and the big price is tariffs,” he told Rogan.
Trump, throughout his nine years running for and serving as president, has pushed ideas that made little sense and were based on his inability or unwillingness to understand basic concepts. In the case of tariffs, he continues to believe that other countries pay tariffs that the United States imposes.
“These tariffs are paid for by the abusing country, NOT THE AMERICAN CONSUMER,” the coup-attempting former president wrote, inaccurately, in a social media post Thursday.
Economists across the political spectrum describe his view of tariffs as absurd. They point out that American tariffs are paid by American importers at ports of entry as customs duties, which are then passed along as higher prices to consumers.
“I view this as so self-evidently stupid that it doesn’t require much discussion,” Douglas Holtz-Eakin of the conservative think tank American Action Forum, said about Trump’s plan.
He said that the country will import about $38 trillion in goods over the next 10 years while the income tax is expected to bring in about the same amount. “That’s essentially a hundred percent tariff rate to match that up,” he said.
And because retailers have a fairly low profit margin on imported goods they sell, a 100% tariff would translate into about a 95% increase in prices for everything from clothing to household items to electronics.
Ernie Tedeschi, an economist at Yale University’s Budget Lab program, said that a 100% tariff would result in a 9.2% loss of purchasing power. For a family with the median household income of $80,000, that translates to $7,360 less to spend each year.
And with nearly half of all Americans making so little that they owe no federal income tax at all ― but who still pay Social Security and Medicare taxes ― Trump’s plan would increase their tax burden by hundreds and thousands of dollars per year, depending on their disposable income.
“Tariffs mainly pinch the middle class and the working class, like any consumption tax,” Tedeschi said.
Trump’s plan would also mark a complete change in the country’s century-old system of progressive taxation, in which people who earn more are taxed at a higher rate than those who make less. His proposal would benefit the rich the most, with the burden falling more on the lower-middle class and the most, proportionally, on the poor.
Both Tedeschi and Holtz-Eakin say these hypothetical scenarios are unlikely because the high tariffs would not exist in a vacuum. “People change their behavior. Other countries change their behavior,” Tedeschi said.
Other countries would retaliate with their own tariffs, slowing international commerce dramatically and almost certainly triggering a major worldwide recession.
And Americans would respond by buyer fewer foreign-made goods, switching to American-made products, which is Trump’s goal. But once that happens, the federal government’s major new tax revenue stream would start drying up, and the income tax would be gone.
Trump could try to raise more money by increasing tariffs even more, past 100%, but that would decrease the consumption of imported goods even further.
“You run into infinity, basically, in terms of the tariffs you need,” Tedeschi said. “It’s mathematically impossible.”
Holtz-Eakin, who served as Republican presidential nominee John McCain’s top economic adviser during his 2008 campaign, said that the view Trump and some of his allies share of the 1890s as a high point in American history also makes no sense.
