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Maybe Tariffs Aren't that Bad BECAUSE They are a Tax

3/13/2018

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We are living in Bizarro world right now. Unions are praising Trump for the steel and aluminum tariffs he announced and liberals are condemning him for it. What timeline is this again? 

I have, for most of my life, been a proponent of free trade, albeit a soft one. I've never gone out of my way to support it as I've always felt a bit ambivalent about it. But, I have always recognized that it was a tax on American consumers, which is one reason I opposed them.

But maybe that's one reason to support them.

I don't like taxes, but let's not kid ourselves, they're not going away. So if we need to raise tax revenue, what better way to do it than to prop up and incentive domestic industry with tariffs? If the government raises money through import tariffs, it could, say, pass a large tax cut. 

Let's say you have two options:

Option 1: Pay $100 dollars for a foreign good, but have to pay $10 extra in taxes. Or;

Option 2: Pay $110 dollars for that foreign good (with the added price price of the tariff passed along to the consumer). 

Both are effectively the same, so who cares? 

Or perhaps an American company will pay an additional $10 in taxes because the government needs to raise that money somehow. Well, in that case, both are the same to the consumer, but the producer would stay in the United States creating jobs here at home.

Of course, there's a lot more to it than that and you have to be careful not to start a trade war (although the United States would have a huge advantage if one started), but given that taxes are about the only thing we can be sure of outside of dying, it would seem to me to make more sense to put those taxes on imports than on our own income or that of American companies.


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