Quote:
Originally Posted by EldrickOnIce
If tariffs resulted in resulted in the 'average' American family paying $1700 a year more in increased cost of living, but income taxes were reduced to the average American family by $1700 (using the money collected in tariffs to fund the tax break), who is paying the tariff then?
|
It's complex, and would vary. But it's important to remember that it's nowhere near a 1:1 relationship between tariffs collected and the cost of living increase. For instance, a big part of the increased costs from tariffs is that domestic producers have less foreign competition, so they can raise their prices.
If an American-made good costs $100 and a Chinese good normally costs $80, but now the Chinese one costs $128 due to tariffs, the American company can raise their prices. So if they raised their price to $120, that's increasing the cost for consumers by 20% on the American good, yet the government wouldn't collect any tariff revenue from those.
And or course, we're talking about Republicans here. They will cut taxes along with introducing tariffs, but they will cut them primarily on high earners. The study that came up with that $1,700 figure estimated the impact of tariffs along with proposed tax cuts on after-tax income by quintile:
Lowest quintile: -3.67%
Second quintile: -2.46%
Middle quintile: -1.40%
Fourth quintile: -0.81%
Top quintile: +0.21%
Top 1%: +1.36%
So the bottom 80% lose money while the top 1% see basically all the gains. And that doesn't even get into potential economic issues created due to tariffs such as potentially reduced productivity, less trade, and retaliation by other countries.