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Trump's Tariffs and Elimination of Income Taxes Will Benefit the Rich and Harm Everyone Else


Trump's proposal to impose a 20% tariff on imports and eliminate federal income taxes would have significant economic and social impacts on the United States and its citizens:


Economic Effects


GDP and Employment

  • The plan is estimated to reduce long-run GDP by 0.8% and eliminate about 684,000 full-time equivalent jobs3.

  • The capital stock is projected to decrease by 0.7%3.


Federal Revenue

  • Federal income taxes currently account for approximately half of the nearly $5 trillion in annual federal revenue4.

  • A 20% tariff on imports could generate around $800 billion in revenue, based on current import levels2.

  • This would result in a net loss of about $1.6 trillion in federal revenue, or a 33% decrease in total federal collections2.


Trade and Manufacturing

  • High tariffs would likely reduce imports significantly, potentially harming U.S. productivity and industry2.

  • The goal of "bringing back manufacturing" may not be achieved, as tariffs don't address core competitiveness issues2.


Impact on Citizens


Income Distribution

  • The plan would disproportionately benefit higher-income taxpayers, who currently pay the most in income taxes1.

  • Lower-income individuals, who often pay little or no federal income tax, would be more heavily impacted by increased prices due to tariffs2.


Household Costs

  • Before accounting for behavioral changes, the average annual tax increase on U.S. households from tariffs is estimated at $6253.

  • Actual costs to households would likely be higher due to reduced incomes and limited consumer choices3.


Government Services

  • The significant reduction in federal revenue could lead to substantial cuts in government services, potentially affecting programs like healthcare for the elderly and support for individuals with disabilities2.


Overall Assessment


Trump's proposed plan would likely result in a more regressive tax system, benefiting wealthier individuals while potentially harming lower-income and elderly populations. The substantial loss in federal revenue would necessitate significant cuts in government spending, affecting various public services. Additionally, the high tariffs could negatively impact U.S. economic growth, productivity, and international trade relations.


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