Former President Donald Trump wants to raise tariffs, while his Democratic rival, Vice President Kamala Harris, wants to raise the corporate income tax rate. They say we don’t have to worry about the consequences of these tax increases because someone else will pay for them.
Don’t trust them. Both proposals would stifle economic growth, impose significant costs on ordinary Americans, and far exceed their advertised goals.
President Trump proposed a “universal tariff” of up to 10 percent last year, more than four times the existing rate. Trade Weighted Average 2023. Recently he pitch The general rate is 20%. He thinks Chinese imports should be subject to much steeper tariffs. 60 percentmaybe more.
When Trump raised tariffs during his first term and started a disastrous trade war, he claimed The costs were borne by exporters. “China is bearing the entire burden of tariffs,” his top trade adviser asserted in 2019.
The tariffs are designed to raise the prices of imported components and finished goods, but Trump still pretend They don’t hurt American businesses and consumers. Analysis of Trump’s tariffs tells a different story.
For example, in 2020, Pablo Fajgelbaum and three other economists Reported The result: “American consumers are bearing the full cost of American tariffs.” Another study Published that same year, Fajgelbaum and his colleagues calculated the net economic loss to the United States at $16 billion per year, which increased to $25 billion when the impact of retaliatory measures by other countries was taken into account.
Tax Foundation calculation The 10% general tariff, he said, would “raise taxes on American consumers by more than $300 billion a year,” “reduce the size of the U.S. economy by 0.7%,” and “eliminate 505,000 full-time jobs.” The retaliation, he said, “would reduce U.S. GDP by another 0.4% and eliminate 322,000 full-time jobs.”
The Peterson Institute for International Economics said Trump’s tariff proposals, including a 60 percent tax on Chinese goods, would reduce after-tax income by about 3.5 percent for the bottom half of the income distribution. calculation. “The average family in the middle of the income distribution will pay at least $1,700 more in taxes each year.”
As Trump ignores the cost, Harris Voters want to believe They argue that raising the corporate income tax rate from 21% to 28% is simply a matter of “security.”[ing] The wealthiest Americans and the biggest corporations pay their fair share.” But that’s only true if you overlook the following: Broader economic impact Such a change would hurt less wealthy Americans, their workers, consumers and investors.
“Research shows that corporate income tax that “It is the most detrimental tax to economic growth,” the Tax Foundation said. Warn. on the other side, Recent research He points out that the 2017 tax cuts supported by Trump lifted the U.S. from the top to the middle ranks of developed countries and “led to a significant increase in domestic investment.”
Raising the cost of doing business in the United States would discourage investment, reduce wage and benefit growth, encourage job relocation overseas, and reduce retirement savings returns. The Tax Foundation estimates that “when the corporate tax rate is below 28 percent,” “every dollar of income increases reduces GDP by $1.84.”
It gets worse. “In the long run, when the economic impact of that higher rate is fully realized, we estimate that for every dollar raised, GDP would fall by $2.19 more sharply,” Harris said. promise Her financial plan states that “no one making less than $400,000 a year would pay more in taxes,” but that doesn’t mean that people with relatively low incomes would be spared the indirect costs of punishing “the wealthiest Americans and the biggest corporations.”
Like Trump, Harris wants voters to overlook the predictable consequences of her tax agenda. In both cases, Americans are being asked the questions the candidates want to avoid.
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