Two Cheers For A Revenue Tariff

Let’s make clear that a pure 19th century-style “Revenue Tariff” would not be the worst thing in the world. That’s because it mostly taxes consumption, which is the least damaging way to extract the revenue needed to fund America’s Leviathan on the Potomac—that is, what’s left after Elon has his way with it.

To be sure, the more efficient and elegant form of consumption taxation would be a proper VAT (value added tax) or even a national sales tax. But neither of those are ever going to happen because the way is powerfully blocked by a motley coalition of liberals and bleating hearts who claim consumption taxes are unfair to poor people and the GOP’s army of fanatical Never Taxers, who can’t even see straight on the topic.

So, the third best thing is an import tax. That’s because owing to the hollowing out of American industry by the Fed and the Washington-spenders, as we amplified in Part 1, it would largely fall on imported final consumption items.

However, a pure Revenue Tariff would needs be imposed on a strict across-the-board basis at a rate of, say 10%, on each and every item of imports processed by the US Customs Service. No exceptions!

In 2024 US imports amounted to just under $3.3 trillion. A 10% revenue tariff, therefore would generate an average of $375 billion per year over the next decade (assuming 2% inflation) or $3.75 trillion over FY 2026 to FY 2035.

But here’s the thing. It should only be done under two very strict stipulations:

• As a Revenue Tariff it should be kept clear and far away from the Donald’s cotton-pickin’ deal-making hands and his penchant for start and stop haggling, which is enormously disruptive to productive commerce and is actually an open invitation to the corruption of beltway lobbying for exceptions.

• It should be strictly applied to chiseling away at the $22 trillion baseline deficits built in over the next decade according to CBO. In truth, this prospective red ink is more like $25 to $30 trillion if you make allowance for removing all the spending cut and revenue increase gimmicks in the CBO baseline that are never likely to happen, and also allow for the budget cost of upsets to the perfect economic weather for the next decade assumed by CBO but which will never happen, either.

Needless to say, these strictures run afoul of some of the tastier items in the Donald’s box of White House chocolates. To wit, he’s mainly interested in the deal-making and power politics part of the tariff, not its revenue potential.