“It’s true that taxes distort behavior, and that America’s income-based taxes—especially the corporate tax—are among the most damaging varieties. Economists prefer consumption taxes, which leave income alone until it’s spent, sparing savings and investment from double (or triple) taxation.
Leaving aside their protectionist nature, if tariffs did that, it might make sense to think about substituting them for other, worse forms of taxation. But they don’t.
Take an actual consumption tax—the value-added-tax—which is applied uniformly to domestic and imported goods, rebated at the border for exports, and structured to avoid double-taxing investment. Tariffs, on the other hand, single out imports, which account for only about 15 percent of U.S. consumption. Different goods from different countries also face different rates. Thus, they are neither broad-based, nor neutral or transparent. They’re just an additional tax that tries to push buyers toward less-preferred products.
Worse, tariffs fall heavily on capital inputs like machines and other equipment. More than half of U.S. imports are raw materials, intermediate goods, or capital equipment—things we need to build other things. As the American Enterprise Institute’s Kyle Pomerleau notes, this makes tariffs more, not less, distortive than our current capital income taxes.
The latter allow firms to deduct investments in machinery and equipment, lowering the effective tax rate from what’s on paper. Tariffs provide no such deduction. That makes investing in U.S. capabilities—precisely what spurs productivity and wages—more expensive. Far from being a relatively tolerable consumption tax, tariffs are an inefficient, arbitrary surcharge on growth.
Tariffs fail another principle of good taxation: stability. A serious tax system is predictable, allowing businesses and households to plan ahead. Tariffs are imposed unilaterally under statutes like Section 301 or even emergency powers. As recent experience shows, they can be, and often are, reversed overnight without any assurance they won’t soon reappear. That’s not a reliable revenue source or incentive for businesses to proceed with confidence.
Finally, tariffs invite carveouts and favoritism. Politically connected firms routinely secure exemptions, exclusions, or special treatment, drastically narrowing the tax base. Since April’s “Liberation Day,” exclusions have sheltered goods worth more than $1 trillion while other goods got hammered. A tax code riddled with loopholes secured through Congress is bad enough; a tariff regime where lobbyists compete for carveouts so quickly and effectively is worse.
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In the most recent fiscal year, the federal government collected about $2.4 trillion from the individual income tax. That’s 49 percent of federal tax revenue. The Tax Foundation’s calculation for 2021 shows that collections from those earning less than $200,000 amount to $737.5 billion annually. There’s also $430 billion brought in from the corporate income tax in fiscal year 2024.
Extrapolating from the Treasury Department’s duty collection for July, Trump’s sweeping new tariffs might bring in as much as $360 billion this year—significantly higher that the pre-Trump era collection of $80 billion. Grandiose plans to do away with most people’s income taxes would mean raising tariff rates far higher than even Trump wants, and without all the carveouts. Then, we’d need to hope for the impossible—namely, that the tariffs don’t kill off a ton of economic activity.
Tariffs are not a realistic tax base. They’re among the worst taxes imaginable—narrow, arbitrary, unstable, and regressive. They tax investment more than consumption. They reward lobbying over efficiency. And the revenue they raise is but a fraction of annual government spending.”
“Aside from his norm-breaking appeal, Milei’s approach is far different than Trump’s. Milei vowed free-market reforms to overturn decades of populist Perónism—a statist ideology that infected Argentina’s politics since Juan Domingo Perón won the presidency in 1946. His authoritarian approach has dominated the country’s politics for 80 years, with Milei beating Perónist opponents.
By contrast, Trump is overturning America’s historical embrace of free markets and free trade. He sets himself up as an all-powerful charismatic leader, inserts the feds deeply into the economy, and expands the reach of police and military forces. Like Perón, he’s doing it in the name of the “working class.” The U.S. Department of State once described Perónism as a “vague concept of social justice in some ways more akin to a religion than a political movement,” which sounds eerily like MAGA.
Perónism is more avowedly leftist than Trumpism, but MAGA’s “right-wing” policies sometimes seem indistinguishable from left-wing ones. Argentina’s populist movement has been successful at one thing: turning one of the world’s wealthiest countries into an impoverished basket case. Americans think of Argentina as a benighted third-world nation. But as economist Dan Mitchell explains, it was the 10th wealthiest nation in the world when Perón took over. It was often viewed as a European nation that happened to be in Latin America.
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On an unrelated note, Milei isn’t smitten by overseas authoritarians, unlike our president. Overall, Milei is using his power to loosen the government’s grip, whereas Trump—although he occasionally reduces regulations—is centralizing government power. The two men have bad hair and unpredictable temperaments, but beyond that the similarities dissipate quickly.”
“As President Donald Trump’s tariffs make life less affordable and predictable for Americans, they’re also threatening to make it less creative. American craft stores are struggling to keep up with ever-changing trade policies, which are making the foreign-made products they stock more expensive and difficult to access. Many foreign craft supply companies are now unable to ship to American consumers at all.”
“The Problem: The base pay for tipped workers in Washington, D.C., is a fraction of the minimum wage, making their income heavily reliant on unpredictable gratuities.
The Solution: Initiative 82, which phases in a higher base wage for tipped workers until it meets D.C.’s full minimum wage in 2027 ($17.95).
Sounds like a great idea, with the best of intentions. What could possibly go wrong?
Turns out, money has to come from somewhere. New labor costs led many restaurants to raise prices, drop staff, cut hours, or close up shop entirely. Many establishments began charging “Initiative 82 fees,” which customers found difficult to swallow, especially when Maryland and Virginia are just minutes away. According to the U.S. Census Bureau, the average tipped wage worker in D.C. saw their income drop by over $1,800 in the two years since the initiative went into effect.”
“President Donald Trump’s tariff regime is making everything from American-made steel weights, imported yarn, and Amazon’s “everyday essentials” more expensive while his immigration crackdown is causing worker shortages in key industries. These policies will work in tandem to slow down already expensive deliveries of your favorite goods.
“”Does ‘for cause’ require something more substantial than a mere allegation of wrongdoing, such as a formal charge, or a conviction, or even something else?” asks Reason’s Damon Root in a great piece on the precedent the Supreme Court might lean on (Namely Humphrey’s Executor v. United States (1935) and Seila Law v. Consumer Financial Protection Bureau (2020)). “Here’s another question to ask: Is the mortgage fraud allegation that’s been leveled against Cook merely a pretext designed to cover the fact that Trump is actually firing Cook for illegal political reasons?””
“Denver’s high minimum wage, especially its low tip credit, has unintentionally undermined the financial viability of full-service, labor-intensive restaurants. As costs outpace revenue and margins evaporate, once-thriving independent establishments are closing in droves, eroding the city’s cultural fabric and economic diversity.
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Restaurant operators and advocacy groups agree that Covid sparked the decline, but rising costs since have continued to cripple the industry. Property taxes, utilities, insurance, food and drink prices, rent, and one of the highest minimum wages in the country — higher than in Los Angeles or New York — are straining already razor-thin margins.
The city’s low tip credit, which results in a high minimum wage for tipped workers, is a particular pain point.
Denver City Council unanimously passed a minimum wage increase in November 2019 — just four months before the pandemic hit — and it was fully implemented citywide by 2022. Today, the base minimum wage is $18.81 an hour and the tipped wage is $15.79 — increases of about 70 percent and 95 percent, respectively.
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Per 2019 legislation, wage increases are uncapped and rise annually with the Consumer Price Index. In 2026, the base wage will be $19.29. For operators like Ms. Tronco and Mr. Seidel, who said that labor now consumes more than half his revenue, the math no longer works.
“When you force an operator to give raises every January 1 to the group of people who’s already making the most money, it chokes our ability to give a salaried person or an hourly cook a raise,”
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To keep her business alive, Ms. Tronco has cut the hosts and bussers she hired when opening and reduced weeknight server shifts. She raises her menu prices every six months to keep up with costs. Her numbers have taken a hit: Sales are down an average of 10 percent this year.
“It just feels like whack-a-mole,” Ms. Tronco said. “Inflation has affected everyone … Now we’ve got a tariff situation and all my wine importers are telling me that everything is going to go up $3, $4 a bottle.”
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Mr. Padró said the small tip credit is the industry’s biggest burden. He supports a higher base wage, even up to $25, because most of his employees already earn above that. He said that his servers and bartenders average $38 and $44, respectively. Expanding the tip credit would alleviate some of the burden faced by operators.
“I have 17-year-old kids pouring coffee for their teachers, making more than them,” he said.”
A key part of keeping Peru’s currency stable are reforms that made their central bank independent from politicians. Trump is currently weakening this separation in the United States.