Tag: income tax
Right-Wing Media Back Trump's 'Deranged' Plan To Replace Tax With Tariffs

Right-Wing Media Back Trump's 'Deranged' Plan To Replace Tax With Tariffs

During a June 13 meeting with Republican elected officials on Capitol Hill, disgraced former president, convicted felon, and presumptive Republican presidential nominee Donald Trump reportedly floated a proposal for a second term that could involve replacing income taxes with tariffs (taxes on imported goods). Republican attendees later confirmed that Trump had proposed using tariffs (which increase costs for consumers) to cut or even replace income taxes.

Tax and economic policy experts from across the political spectrum criticized Trump's proposal, which could severely disrupt international commerce and the domestic economy while supplanting the United States' existing system of progressive income taxation with regressive consumption taxes.

Some in media blasted the idea as impossible and even “deranged,” pointing out that it would be impossible to replace income tax revenue with tariffs, with experts highlighting that the plan would amount to a huge tax increase for middle class and lower-income Americans. Yet, some in conservative media offered support for the unworkable idea.

Media outlets explain that Trump’s idea just can’t work

Business-focused news organizations such as Bloomberg and even the conservative-leaning Wall Street Journal noted in their reporting of Trump’s idea that replacing income taxes with tariffs is simply unworkable. On cable news, MSNBC called out Trump’s idea as “bananas,” “deranged,” and devastating for working Americans.

  • Bloomberg: “Using tariff increases to offset income taxes is a tall order, because the US brings in much more money from levies on individuals than on imported products.” Bloomberg noted that “customs duties still make up just 2% of federal revenues — while the individual income tax made up almost half of federal receipts in 2023, according to the Office of Management and Budget.” Bloomberg further explained that “increasing tariffs to pay for even a modest tax cut would require a massive hike in import levies that would mean a big increase on consumer prices.” [Bloomberg, 6/13/24]
  • The Wall Street Journal: Trump’s idea of “replacing the entire income tax system with tariffs” is “an arithmetically challenged plan that would reverse more than 100 years of progressive taxation and is virtually assured to raise consumer prices.”The Wall Street Journal further explained that “Trump’s tariffs—or any tariffs—are almost certainly too small to replace the entire income tax. The U.S. imports less than $4 trillion of goods annually and it collects $2.5 trillion in individual income taxes, which means it would take tariff rates of 70% or higher to fill the void left by repealing income taxes. It depends, too, on how much demand for imported goods changes as tariffs rise.” [The Wall Street Journal, 6/14/24]
  • MSNBC’s Stephanie Ruhle: Trump’s policy pitch “was bananas.” One of her guests, CNBC senior analyst Ron Insana, replied that “it would launch a global trade war because you’d get retaliatory tariffs from every other country on the planet.” He added, “We import $3.8 trillion worth of goods. We take in $2.5 trillion in revenue from individual income taxes. So, do the math. You’d have to basically almost put 100% tariffs on all imported goods coming to the United States, which would exacerbate inflation, launch a global trade war, possibly spark a recession or worse.” [MSNBC, The 11th Hour with Stephanie Ruhle, 6/13/24]
  • MSNBC’s Chris Hayes: “Donald Trump proposed one of the most deranged policies I have ever heard.” [MSNBC, All In with Chris Hayes, 6/13/24]

CHRIS HAYES (HOST): Today, behind closed doors, outside of the view of cameras, Donald Trump proposed one of the most deranged policies I have ever heard. He told Republican lawmakers behind closed doors he wants to eliminate the income tax and replace it entirely with tariffs, effectively taking us back to the 19th century. This idea makes as much sense as ripping up the entire Interstate Highway System and replacing it with canals.

Economist Paul Krugman did some back of the envelope math and estimates the policy, quote, “would require an average tariff of 133%.” Not 10%. That is a 133% tax hike on all imported goods that would be passed on to consumers. A sales tax of 133%. It would cost Americans hundreds of millions of dollars. Former senior policy adviser to the National Economic Council Brendan Duke explained further, quote: “Another way to put Trump's latest incredibly unworkable idea. One—” get this, “It would raise taxes by $5,000 for a typical family,” if you’re a working person who buys stuff. “It would cut taxes for the average family in the top 0.1% by $1.5 million.”

This proposal would jack up everything, everywhere for normal people, crushing the average American's wallet, while giving the wealthiest folks who no longer have to pay an income tax and don't buy that much relative to their income, an enormous windfall. Millions and millions of dollars. This is the man who has a 50-50 shot of taking the White House, in large part because of the macroeconomic conditions that produced high inflation. And he is seriously, quite seriously and earnestly, currently running on the most insanely inflationary platform I’ve ever seen. Higher prices, higher taxes, for everyone. It would make what we’ve seen over the last few years look like nothing.

Experts from across the political spectrum explain how Trump’s proposal would raise prices and taxes on the middle class and why it can’t replace the income tax

  • Senior fellow Kyle Pomerleau of the conservative American Enterprise Institute wrote: “Fundamentally unserious stuff. … The price of imports would rise, but so would the [dollar], leading to lower sales and income for exporters.” [MarketWatch, 6/13/24]
  • Committee for a Responsible Federal Budget senior vice president Marc Goldwein: “U.S. imports total ~$3.5 trillion per year, while total income tax revenue is about $3 trillion ($2.5t individual). You’d be well on the wrong side of the tariff Laffer Curve if you tried this.” Goldwein’s Laffer Curve comment reflects the hypothesis that setting high tariffs (as a tax) would end up reducing the economic activity it is taxing, thus reducing the amount of revenue. [MarketWatch, 6/13/24; Cato Institute, 11/21/23]
  • Tax Foundation senior economist and research director Erica York: “The individual income tax raises about $2 trillion annually on a tax base of personal income of roughly $15 trillion. Customs duties currently raise about $80 billion annually on imports of $3.4 trillion.” [MarketWatch, 6/13/24]
  • Former White House Council of Economic Advisers chief economist Ernie Tedeschi: “The most important takeaway from the last 48 hours of tax talk is that President Trump is seriously toying with a large, broad additional tariff as a central component of our tax system. Regardless of the specific rate, that means a substantially higher middle class tax burden.” [Twitter/X, 6/14/24]
  • Nobel prize-winning economist Paul Krugman: “My first-pass estimate” on Trump’s idea of replacing the income tax with tariffs “is that this would require an *average* tariff rate of 133 percent.” Krugman added: “So how is it that in the 19th century the federal government largely paid its way with tariffs? Because back then the government was much, much smaller. Believing that we can go back to those days is just ignorant.” [Twitter/X, 6/13/24, 6/13/24]
  • Brendan Duke, senior director for economic policy at the Center for American Progress Action Fund wrote: “It shifts taxes from wealthy people to low- and middle-income people and people who buy groceries and people who go to Target.” In a thread posted on X, formerly known as Twitter, Duke also explained how Trump’s idea could have negative “effects on democracy and transparency” as well, including by potentially granting “tariff exemptions to supporters & people who give him money” and raising “tariffs on his supporters' foreign competitors,” which would “dovetail” with “the Trump/Project 2025 project of eliminating the bureaucracy's guardrails from political interference.” [The Wall Street Journal, 6/14/24; Twitter/X, 6/14/24, 6/14/24]
  • Washington Post columnist Catherine Rampell: With millions of Americans who pay no income taxes paying tariffs instead, “this sounds like a huge tax increase on the lower/middle income classes.” [CNBC, 6/13/24]
  • Economic analyst Steven Rattner: “Swapping all income tax for tariffs would be unbelievably regressive.” [MarketWatch, 6/13/24]

Right-wing and fringe media endorse Trump’s impossible idea

    • Heritage Foundation economist and former Trump adviser Stephen Moore: Trump’s 10% earlier tariff proposal could instead pay for extending the Trump tax cuts, or the revenue could be dedicated to “lower[ing] the payroll tax—which deters work and hiring.” Moore's pivot to the payroll tax is telling, as it is the dedicated funding source for Social Security, a long-time target of right-wing devotees committed to altering and eventually eliminating the crucial benefit program for retirees. [The Wall Street Journal, 6/14/24; Media Matters, 3/13/24]
    • Moore on Newsmax: “If you could actually eliminate the federal income tax and replace it with an across-the-board tariff, that would be a very good thing for the economy.” Moore continued with his full-throated endorsement of the idea: “Obviously, it would mean, you know, we wouldn't have 40, 50, 70%, you know, progressive income tax rates. You'd be taxing people on their consumption rather than their investments and savings. So, it'd be rocket fuel for the economy if you could do it.” Moore concluded: “For the first 100 and almost 150 years of this country, we had no income tax and we funded most of our government through tariffs. And that was a much more efficient way to fund government than through our crazy income tax right now.” [Newsmax, The National Report, 6/14/24]
    • On Fox Business, Moore retreated from humoring Trump’s idea as a replacement for the income tax: “This is a perfect example of where the left takes Trump literally and not seriously.” Moore watered down Trump’s idea, saying: “He wasn't saying we’re going to completely eliminate the income tax. What he meant to say is that with the tariff revenue that we bring in, if he does that 10% across-the-board tariff, we could use some of that money to reduce income taxes. You could maybe reduce the — you could probably get rid of the entire gift and estate and the death tax. You could maybe cut the capital gains tax. Maybe you could reduce the payroll tax on workers a little bit.” [Fox Business, Varney & Co., 6/17/24]
    • Fox Business host and former Trump adviser Larry Kudlow admitted Trump’s tariff idea can’t replace individual income tax, but pushed it as a replacement for corporate taxes. On his show, Kudlow said “the numbers don’t work” to replace individual income taxes with tariffs before adding: “But the corporate income tax numbers work.” [Fox Business, Kudlow, 6/14/24]
    • Fox & Friends First co-host Todd Piro: “Could Trump get rid of the income tax?” Fox Business anchor Cheryl Casone replied, “I want to say that sounds good, but — OK, let me explain this. It sounds good.” She continued, “Former President Trump is now floating the idea of the U.S. eliminating income taxes, replacing it with tariffs on imported goods. He also says that tariffs could be negotiating leverage against bad actors out there.” Casone then suggested the idea was a way for Trump to get campaign financing from Wall Street, but did not say that the idea would be unworkable. [Fox News, Fox & Friends First, 6/14/24]
    • Fox Business host Charles Payne: “It’s one of these things that … sounds nuts, that sounds far fetched. … Except if — most Americans don’t realize we didn’t always have an income tax.” Payne lamented the initial creation of the income tax structure a century ago, proclaiming “when government got bigger, it got hungrier for power” after the two World Wars. Payne acknowledged “it couldn’t work completely now” but seemed to express nostalgia for when America “actually had an economy driven by zero income taxes.” [Fox News, America’s Newsroom, 6/14/24]
    • Fox Business correspondent Hillary Vaughn: “If the side effect of all of this … is the government being cut down to size, Republicans probably won’t see that as a downside.” [Fox Business, Mornings with Maria Bartiromo, 6/14/24]
    • Gateway Pundit referred to Trump’s idea as “a bold proposal” and “bombshell proposal” to “abolish income tax and implement an ‘all tariff policy.’” [The Gateway Pundit, 6/13/24]
    • Townhall: “Trump Gets Positive Feedback After Floating Proposal of Eliminating Income Tax.” Townhall’s idea of “positive feedback” appears to consist of posts from several random pro-Trump social media users who agreed with the idea. [Townhall, 6/13/24]
    • Students for Trump founder Ryan Fournier: “Eliminating the income tax and replacing it with tariffs doesn’t sound like a bad idea.” [Twitter/X, 6/13/24]
    • Multiple QAnon figures endorsed Trump’s idea. QAnon John wrote: “This would be a MASSIVE BLOW to the Central Bank Cabal. Quite possibly THE single most devastating blow Trump could bring to the Globalists. With a cessation of income tax feeding the fiat debt machine, the Federal Reserve would be FORCED to dissolve into the abyss. It would be the END OF THE FED & DEBT SLAVERY. THAT IS HOW YOU MAKE AMERICA GREAT AGAIN. BRING. IT. ON.” Woke Societies wrote: “Who’s going to say no to this? Trump just won.” Jordan Sather wrote: “How can you not support this?” [Gab, 6/13/24; Telegram, 6/13/24, 6/14/24; Media Matters, 4/18/22]

Reprinted with permission from Media Matters.

income tax

How Working Stiffs Might Think About Trump’s $750 Tax Bill

Reprinted with permission from DailyKos

The $750 in federal income taxes that Donald Trump paid in 2016 and 2017 is an attention-grabbing number—in large part because $750 is a number that a lot of people can wrap their heads around. It's not on the massive scale of federal budget numbers or even of only-for-billionaires expenditures. For people making minimum wage or just above, it may in fact be their annual tax bill. "We're talking about someone who works at a McDonald's, and not someone who is managing it," Joseph Bankman, a tax law expert at Stanford Law School, told The Washington Post. "This is an hourly worker at a fast-food restaurant."

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Ryan Forum Will Preview Poverty Agenda

Ryan Forum Will Preview Poverty Agenda

By Alan K. Ota, CQ-Roll Call (TNS)

WASHINGTON — House Speaker Paul D. Ryan of Wisconsin is opening the door to new initiatives aimed at helping low-income families as he prepares to discuss poverty in a forum showcasing GOP presidential candidates in Columbia, S.C., on Saturday.

The top Republican plans to make the case — with seven GOP presidential aspirants — for a conservative approach to shrinking poverty’s footprint. Both parties have shown a willingness to develop bipartisan initiatives to help 46.7 million Americans living in poverty, even as they vie on the campaign trial over competing economic plans and ideologies.

Robert Doar, a fellow in poverty studies at the American Enterprise Institute, predicted participants would “show the GOP has more to offer than tax cuts and greater growth.”  AEI is one of the sponsors of the gathering.

Ryan plans to join Sen. Tim Scott, R-S.C., to moderate three panels of presidential candidates and to outline his own thoughts in a speech and panel discussion. The event sponsored by the Jack Kemp Foundation could serve as a bellwether of prospects for items that could move as stand-alone bills or as add-ons to broader legislation such as a possible international tax overhaul.

Scott said in an interview there would be openings to move modest proposals aimed at promoting private and charter schools and helping the jobless, including his own plan (S 574) to create a $1,000 business tax credit for employers that hire an apprentice younger than 25 years old.

“We hope that we will see more traction for apprenticeship programs and school choice opportunities,” Scott said.  He said other bigger items such as proposals to broaden eligibility for the earned income tax credit for childless workers likely would be an issue “in 2017 for the next Congress.”

Robert Greenstein, president of the liberal Center for Budget and Policy Priorities, said he hoped Ryan and President Barack Obama could work out differences on proposals to broaden eligibility for the earned income tax credit, or EITC, to low-income workers without minor children but called it “rather doubtful because it’s hard to see the vehicle on which it would move.”

Doar said Ryan likely would focus on ensuring that federal programs do not serve as “poverty traps.”

“He’s open to ideas that can make programs work more effectively and target assistance where people have the greatest need,” Doar said.

Ryan demonstrated his willingness to give ground in the recent $680 billion permanent tax break accord (PL 114-113), which included long-term extensions of the expanded EITC and the additional child tax credit.

Despite the recent tax deal, the two parties disagree over the best way to reduce the nation’s 14.8 percent poverty rate. While Republicans argue for tax cuts and for streamlining aid programs, Democrats advocate worker incentives and raising the federal minimum wage of $7.25 an hour.

Democratic Goals Democrats are looking for ways to shoehorn their own priorities into the floor agenda.

Rep. G.K. Butterfield, D-N.C., said he and other Democrats planned to work with Ryan on efforts to target funding in a range of federal programs to more than 400 rural counties that have the highest persistent poverty rates. For example, one proposal by Assistant Minority Leader James E. Clyburn, D-S.C., would designate a 10-percent share of funds for rural development and other programs to counties with poverty rates of 20 percent or more for the last 30 years.

Aid targeting could face hurdles with conservatives that seek deeper cuts. But Butterfield predicted wide support for putting more existing funds “into poverty counties.” He said he believed “Ryan is ready to deal in a bipartisan way on issues that are important to low-income families.”

Butterfield said he and other Democrats would oppose any effort by conservatives to shrink aid programs such as temporary assistance for needy families, known as TANF. “We would never tolerate any decrease in TANF. We want an increase in TANF funding,” Butterfield said.

And for now, both parties disagree over a GOP push to reshape TANF to ensure enforcement of work requirements while providing more flexibility for beneficiaries to get job training and education. Rep. Charles Boustany Jr., R-La., said he had handed off responsibility for TANF legislation to Rep. Vern Buchanan, R-Fla., as part of the reshuffling of subcommittee gavels, when Rep. Kevin Brady, R-Texas, replaced Ryan as the top tax writer.

©2016 CQ-Roll Call, Inc., All Rights Reserved. Distributed by Tribune Content Agency, LLC.

Photo: Newly-elected U.S. Speaker of the House Paul Ryan (R-WI) holds his first news conference at Republican National Committee headquarters in Washington November 3, 2015. REUTERS/Gary Cameron

A Tax System Tilted Toward The Rich

A Tax System Tilted Toward The Rich

By Joseph Anthony, Los Angeles Times (TNS)

Congress managed to pass a tax bill in December — a great relief to tax professionals like myself who are going to spend the next four months preparing returns for clients. But what our legislators didn’t do was address the fundamentally unfair way the United States taxes people who work for a living compared with people who live off of the earnings of their investments.

Our current system hits working Americans with punishing rates compared with what the investing classes are charged. A generation’s worth of legislative twists have left our tax code so warped that during the coming filing season, one married couple bringing in $150,000 in total income from two jobs could find itself paying almost three times as much in federal income taxes as another couple that is alike in every way — except for the source of its income.

The tax code started to tilt in the direction of favoring income from investments — or favoring the 1 percent, if you will — more than 20 years ago. In 1993, the year Bill Clinton took office, a married couple claiming the standard deduction — with no children, tax credits or other adjustments to income — and earning $75,000 apiece in wages, would have paid $35,650 in federal income taxes.

A similar couple, whose income came solely from long-term capital gains, would have gotten a small break thanks to what was then the 28 percent top rate on those gains. Their total tax bill, $34,158, would have been about $1,500 lower than that of the wage earners.

By 2000 — the year George W. Bush was first elected — the tax gap between wage earners and investors had already opened up. In that year, our two-wages couple would have paid $33,607 in taxes. They also would have paid that amount if all of their income had been from stock dividends; there was no preferential treatment for dividends at that point.

But the couple whose income came from long-term capital gains would have paid $23,025 in taxes — almost a third less.

Fast-forward to the 2014 tax season. Our two-income couple are still working full time to make the same $150,000 (not a farfetched scenario in our new-normal era of stagnant wages). After a decade’s worth of inflation adjustments to their tax bracket, their tax bill is now $24,138.

And the couple living off of their investments? Their tax bill — whether their money came from long-term capital gains or qualifying dividends — has been slashed to $8,385, or a little more than one-third of the tax load on wage earners.

Some of my clients who get their money from unearned income find this discrepancy unbelievable when they compare their federal taxes to their state bills. During this tax season, I know I will have clients — in California and Oregon, where I live — who will pay more in state income taxes than they do in federal taxes. I may even have some clients who will be stunned to learn that they face a four-figure state tax bill while paying exactly zero in federal income taxes for the year.

The reason: The federal code provides that there is no tax on capital gains or qualifying dividends for people in the 15 percent income tax bracket. That means that a Los Angeles married couple filing jointly for 2014 with $94,100 of adjusted gross income, all from long-term capital gains and qualifying dividends, would pay nothing — zero! — in federal income tax. But their California tax bill would be north of $3,000.

How did we get to this point? No legislator ever campaigned saying, “Tax laborers more than investors!” But several changes in the code since the early 1990s, including lowered tax rates on capital gains and lowered rates on qualified dividends, have conspired to produce that result. My high-income clients were dismayed last year by the new 3.8 percent net investment income tax, which applies to joint filers with modified adjusted gross incomes of more than $250,000 ($200,000 for singles), but that affects relatively few filers and, perversely enough, applies to non-tax-advantaged income such as rentals, as well as to dividends and long-term gains.

Neither political party gets sole credit or blame. President George W. Bush was most aggressive about pushing such tax changes, but breaks for unearned income were also passed and extended under both the Clinton and Obama administrations. Supporters argued that lower rates would benefit retirees living on fixed incomes and also spur investments. But the Center on Budget and Policy Priorities says that almost half of all long-term capital gains in 2012 went to the top 0.1 percent of households by income. For the nearly 60 percent of elderly filers who had incomes of less than $40,000 in 2011, the lower rates were worth less than $6 per household.

In 1924 — a different era to be sure — industrialist-robber baron-Treasury Secretary Andrew Mellon wrote in support of treating wages more favorably than investments. “The fairness of taxing more lightly income from wages, salaries or from investments is beyond question,” he wrote. “In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their metal and physical energy and the people whose income is derived from investments.”

Well, that’s certainly not going to happen any time soon. But leveling out the tax treatment of wages and investment incomes would increase both the perceived and actual fairness of the tax code. It would eliminate preferences that distort investment and financial planning decisions. A fairer code might also increase respect for the system and improve tax collection rates overall.

Photo: 401(K)2013 via Flickr

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