“In 2021, on April Fools’ Day, Manistee County, Michigan, took the title on Chelsea Koetter’s home because of a small debt she owed on her 2018 property taxes. Unfortunately, this wasn’t a prank.
Four months after seizing her home, which she shared with her two sons, the government auctioned it off for $106,500. It kept the profit.
All told, Koetter owed the government $3,863.40, which included her initial tax debt as well as penalties, interest, and fees. She does not contest she was obligated to pay that. At issue is whether the county acted lawfully when it pocketed the remaining $102,636 after selling her house, a practice known as home equity theft.
The issue may sound familiar. In 2020, the Michigan Supreme Court ruled the practice unconstitutional after the government seized Uri Rafaeli’s home, then sold it and kept all the proceeds in excess of what he owed. His initial tax debt was $8.41.
The U.S. Supreme Court weighed in on the issue last year in Tyler v. Hennepin County, ruling unanimously that Hennepin County, Minnesota, violated the Constitution when it seized an elderly woman’s home over a debt, sold it, and kept the profit. “A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed,” wrote Chief Justice John Roberts, referring to plaintiff Geraldine Tyler, who had fallen $2,300 behind on her property taxes. The total came to $15,000 after penalties, interest, and fees. After the sale, the government kept what was left over—$25,000. The Court said that was illegal.
Instead of complying with a straightforward interpretation of the law, Michigan has attempted to dance around it, passing a byzantine debt collection statute that sends homeowners on a wild goose chase should they want their equity back.”
“Start with that $30 toaster made overseas. Now, slap a 10 percent tariff on it, so that consumers must pay $33 to buy it. That means the Treasury Department collects $3 in new revenue, but it also means that domestic toaster-makers can sell their wares for $32 and undercut the imported models.
If tariffs cause consumers to switch to those domestic-made toasters, Cass acknowledges that consumers are out two bucks. This is what economists call a “deadweight loss” and it’s one of the major reasons why tariffs harm the economy.
Cass, the head of American Compass and a prominent proponent of the conservative moment’s shift toward central planning, wants to focus on the benefits of those higher prices. “The share of the $32 purchase price that would once have gone to a Chinese factory and its workers now goes to an American firm and its workers instead,” he argues. “It pays American taxes and supports American families in American communities.”
All of that for just $2 more. Wow, what a great deal!
Unfortunately, Cass is wrong about the math and wrong about the underlying economics.
Tariffs can, of course, be used to make foreign-produced goods (like toasters) more expensive. That doesn’t mean that manufacturing firms will radically redesign their supply chains to produce more toasters in the United States. And if they did do that, those new toasters wouldn’t cost a mere $2 more than the ones available at Home Depot now. Cass is making several wild logical leaps here, and offers no evidence to substantiate this claim of a hypothetical $32 American-made toaster.
How much would that toaster actually cost? More than $250.
That’s the figure offered by Ed Gresser, the former assistant U.S. Trade representative who is currently the director of trade and global markets for the Progressive Policy Institute (PPI). Unlike Cass, Gresser understands how tariffs and trade work.
More importantly, he also shows his work. Because there are no kitchen appliance manufacturers making toasters in the United States right now, he examined the prices of toasters made in other wealthy, western countries like Italy, Japan, and the United Kingdom. At the lowest end, those toasters cost the equivalent of $250, and some would be significantly pricier.
“In sum, ‘developed’ high-income countries do make home toasters. But they are profitable at prices about ten times those you’d find in mainstream U.S. retail outlets.,” writes Gresser. “So to achieve Vance’s apparent goal, mainstream toaster prices would probably have to rise to Neiman Marcus levels, say $300 each.””
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“there would be far more toaster-buying consumers than toaster-making workers—and the consumers would be far worse off. Indeed, the workers would be worse off too, since they become consumers as soon as they clock out for the day.
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“Now, imagine what would happen if you told them that the price of jeans would have to increase tenfold, as would be the case with toasters. I suspect that Cass—and Sen. J.D. Vance (R–Ohio), who is making a version of this same argument on the campaign trail—is relying on faulty math and bad economics because he’s aware that the real numbers would be unpalatable to just about everyone.”
In a series of panels about promoting North American gas, oil, and uranium energy in ways that will boost the economy and make North America strong and independent vis-a-vis world challenges, people are worried about the effects of Trump’s proposed tariffs which will hurt both countries’ economies and make energy more costly.
“When asked why Harris has not distinguished herself by opposing these measures, Lincicome notes that supporting tariffs is just part of the “conventional wisdom in Washington today” even if polls may not completely support this assertion. “The view among the political experts is that elections are won or lost in a few places with a few votes,” and those critical “voters like tariffs.”
Given the IMF’s projections, bipartisan support for tariffs could lead to increased costs and slower economic growth for Americans regardless of who wins in November. ”
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“former President Donald Trump floated a specific 60 percent tariff on Chinese goods alongside a 10 percent across-the-board tariff, which he recently increased to 20 percent. “It’s just what he thinks galvanized an audience,” Scott Lincicome, vice president of general economics and Stiefel Trade Policy Center at the Cato Institute, tells Reason. “Let’s face it, none of this has any rigorous econometric modeling behind it, so it could be as simple as he thinks 20 percent sounds better.”
“Taking the candidates at their word, you would have to say that Trump’s tariffs would be orders of magnitude worse than what Kamala Harris might do, or say she will do,” Lincicome adds.”
“Check the U.S. Constitution, and you’ll see that Article 1, Section 8 clearly gives Congress sole authority over “Taxes, Duties, Imposts, and Excises.” Unfortunately, Congress traded away much of that power during the 20th century, beginning in the aftermath of the Great Depression—which was considerably worsened by a series of tariffs passed by Congress—and continuing with various laws passed in the 1960s and 1970s, as the Cato report details.
In theory, handing over those powers made sense. Lawmakers were more likely to be influenced by parochial interests and would favor protectionism that benefited some local industry, even if it came at the expense of the nation’s economy as a whole. Presidents, it was assumed, would take a more expansive view of the benefits of trade and would use those powers to reduce barriers like tariffs.
For a long time, that was true. It no longer is. Both Trump and President Joe Biden have favored protectionism, and have faced scant opposition from Congress or the courts.
If Trump returns to the White House in 2025, he would assume huge power over the flow of goods into the United States “without substantial procedural or institutional safeguards” due to the “broad and ambiguous language” included in many of those trade laws passed decades ago, Packard and Lincicome write.
The tariffs that Trump imposed during his term in office took advantage of many of those same powers.”
“Trump fans applauded when he said he’ll eliminate taxes on tips. Then Harris proposed that, too. Her audience applauded. Trump then proposed not taxing overtime. More applause.
But narrow tax exemptions are bad policy.
In my new video, economist Allison Schrager explains how they create nasty, unintended consequences.
“No one likes tipping,” says Schrager, “but all of a sudden, you’ll have to pay tips for everything.…More people will be paid in tips.””
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“Trump’s proposal to eliminate tax on overtime would reduce hiring.
“Employers may hire fewer people so they can give more overtime to employees they have already,” says Schrager.”
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“rent control is destructive. “Sounds really good,” says Schrager. “But all it means is that people are less inclined to rent to you.”
“Why would you enter a market where it seems like the government is actively trying to hurt you?” Adds Mercatus Center economist Salim Furth. “You’re providing an essential service, something human beings need to live, and the government views you as a hostile outsider. I wouldn’t want to bring any service into a market like that.”
Argentina’s new libertarian president just scrapped rent controls. The supply of rental apartments doubled, and prices declined by 40 percent! That’s good policy.
But Harris proposes the opposite!”
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“Trump’s (and Joe Biden’s) tariffs don’t just punish China, they reduce choice and raise prices in America.
“Free trade is good!” says Schrager. “It brings lower prices, making our own industries more dynamic, raising our income.”
“But trade does take away some Americans’ jobs,” I point out.
“But it creates a lot of other new jobs,” she replies.
It sure does. More and better jobs than those lost through trade.”
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“She proposes giving “first-time homebuyers” $25,000. Again, her fans applaud.
Schrager explains, “free” money from government doesn’t increase the supply of homes. When every buyer has $25,000 more, “they just bid up prices even higher!””
“The Tax Foundation estimates that a 10 percent general tariff “would raise taxes on American consumers by more than $300 billion a year,” “reduce the size of the U.S. economy by 0.7 percent,” and “eliminate 505,000 full-time equivalent jobs.” Retaliation could “further reduce U.S. GDP by 0.4 percent and eliminate another 322,000 full-time equivalent jobs.”
Trump’s proposed tariffs, including a 60 percent levy on Chinese goods, “would reduce after-tax incomes by about 3.5 percent for those in the bottom half of the income distribution,” the Peterson Institute for International Economics estimates. They “would cost a typical household in the middle of the income distribution at least $1,700 in increased taxes each year.”
Just as Trump ignores those costs, Harris wants voters to believe that raising the corporate income tax rate from 21 percent to 28 percent is simply a matter of “ensur[ing] the wealthiest Americans and the largest corporations pay their fair share.” But that is true only if you overlook the broader economic impact of that change, which would hurt non-wealthy Americans as employees, consumers, and investors.
“Studies have shown that the corporate income tax is the most harmful tax for economic growth,” the Tax Foundation warns. On the flip side, recent research indicates that the Trump-backed 2017 reduction in this tax rate, which moved the U.S. from the high end among industrialized countries to the middle of the pack, “significantly boosted domestic investment.”
By raising the cost of doing business in the United States, a higher corporate tax rate inhibits investment, drives down wage and benefit growth, encourages offshoring of jobs, and reduces the return on retirement savings. “Under a 28 percent corporate rate,” the Tax Foundation estimates, “GDP would fall by $1.84” for “every $1 of higher revenue.””
“The signature policy proposal of Donald Trump’s third campaign for the presidency is a tariff: a tax of 60 percent imposed on all imports from China and 10 percent on imports from any other country. Not only does he want this tax hike, which would raise about $291 billion or 1 percent of GDP when fully implemented, but he says he’ll do it unilaterally. “I don’t need Congress, but they’ll approve it,” Trump declared at a September 23 rally. “I’ll have the right to impose them myself if they don’t.”
This is a rather enormous policy change for a president to undertake unilaterally, and one of dubious legality. For comparison, the hike Trump is considering is over twice as large as the tax increases used to fund Obamacare. (And make no mistake — tariffs are tax increases.) Experts like former World Trade Organization (WTO) deputy director-general Alan Wm. Wolff have argued that no law passed by Congress gives the president the power to levy across-the-board tariffs along the lines Trump proposes.
Even so, Congress has given the executive branch a remarkable amount of flexibility to set tariffs. This is a mistake. Members of Congress, whether or not they support Trump’s tariff plans, should be able to agree on this much: As the Constitution lays out in the taxing clause, it’s Congress’s job to set taxing and spending policy for the United States. It’s been that way for the US’s whole history, it’s the traditional role of legislatures in all democratic countries, and putting this power instead in the president’s hands cuts the people’s representatives out of the process of determining how they are taxed — a concept that goes back to before the American Revolution.”
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“The presidential power to impose tariffs does not originate from a simple bill or program; rather, it slowly accreted over time, with a particular expansion over the past decade as the Trump administration rediscovered authorities in old laws that enabled it to wage a trade war with China and protect the steel industry.
Section 232 of the Trade Expansion Act of 1962, for instance, gives the president the right to levy tariffs upon the secretary of commerce’s recommendation without asking Congress. This was the authority Trump used to slap tariffs on steel and aluminum back in 2018, tariffs which Biden recently expanded slightly.
Section 301 of the Trade Act of 1974 gives a similar power to impose tariffs based on unfair trade practices by foreign nations on the advice of the Office of the US Trade Representative. Trump used this power to impose sweeping tariffs against China. Biden has made liberal use of this power, too, expanding tariffs on steel, batteries, solar cells, and electric vehicles from China.
Finally, there’s Section 201 of that same 1974 law, which allows tariffs against imports that “seriously injured or threatened … serious injury” to domestic companies. Trump and Biden have used this to justify tariffs on washing machines and solar cells from most countries.
Even if Trump couldn’t implement a full 10 percent tariff on all imports with his executive powers — because the previous authorities apply only to specific industries or specific countries — he could make a lot of progress toward that goal. His 60 percent tariff on all Chinese imports, for instance, may very well be possible because it’s narrowly targeted at one nation. He and Biden have proven that the president can, without Congress, raise taxes on imports very significantly.
I happen to think most of both Trump and Biden’s tariffs were wrongheaded and that Trump’s plan for more sweeping tariffs amounts to a significant tax increase on the poor and middle class that would hurt US exports, invite retaliation from other countries, harm America’s international reputation, and fail to create any jobs for people who need them. (Vice President Kamala Harris has attacked the Trump tariff plan as a “sales tax” but hasn’t disavowed Biden’s tariff policies.)”