A properly applied tariff is loaded with benefits. First, a tariff is both a flat tax and, as consumption tax, like the Fair Tax. Tariffs lead to employment and higher wages that, in turn, reduce the safety-net burden on other taxpayers while increasing tax revenue from all other tax structures.
The tariff is, first of all, a consumption tax, and as Fair Tax proponent Mike Huckabee notes, even the drug dealers pay this tax.
Secondly, a tariff is a flat tax, and, as a flat tax, it is simple and direct. None of the benefits of a tariff are diverted to an insidious, invasive, and pervasive bureaucracy such as the IRS. Furthermore, flat taxes are known to be the most just forms of taxation. Paradoxically, the flatter the tax, the more progressive it is. That is, the rich pay more of the total percentage of a tax when the tax is flat.
A properly applied tariff is a superior form of taxation. The founding fathers knew this when they made the tariff the sole tax available to the young republic. For more than one hundred years, by the tariff alone, America grew economically until the United States was the premier economic force of the twentieth century.
However, a properly applied tariff has tax benefits in modern America beyond its nature. The 2018 story of United States Steel is a case in point. In March it announced that it would call back 500 employees to work at its Granite City Illinois plant. This is it did in direct response to President Trump’s announced tariffs on imported steel.
“Our Granite City Works facility and employees, as well as the surrounding community, have suffered too long from the unending waves of unfairly traded steel products that have flooded U.S. markets,” U.S. Steel President and Chief Executive Officer David B. Burritt said in a statement released Wednesday.
Obviously, a second embedded tax benefit results from a classically employed tariff: the newly employed steel workers in Indiana will no longer be a safety-net burden on other tax payers. They will no longer be on the brink of seeking food stamps, subsidized housing, or receiving tax refunds based on low income tax credits.
Equally apparent to everyone but bought and paid for politicians is that the effective use of the tariff increases tax revenue via the income tax. The Indiana steel workers will earn more income and, hence, pay more income taxes.
The tariff is a superior form of taxation and, while it should be judiciously, it is to be preferred over all other forms of taxation in the United States of America. Tariffs should be abandoned only for the best international trade agreements, agreements we haven’t seen since, well, the institution of the income tax and the rise of the Federal Reserve Bank.