Donald Trump Has a New Unbelievably Stupid Idea

By Jacob Weindling | June 14, 2024 | 10:20am

Photo by Anna Moneymaker/Getty Images

Economy Donald Trump

Donald Trump Has a New Unbelievably Stupid Idea

Donald Trump famously loves to raise taxes on every single American. He would never describe it this way, but his plan to jack up tariffs is widely viewed by every respectable economist across the ideological spectrum as a tax hike on everyone. Now, he is adding another dimension to this obsession with raising America’s taxes, and it’s getting rid of over 100 years of progress on progressive taxation.

Trump had a private meeting with Republicans this week where business leaders who attended were shocked by how much he had cognitively slipped, and Trump floated the idea of an “all tariff policy,” where he would get rid of the income tax and replace it entirely with tariffs on imports.

Most Popular

This would be a massive tax increase on people in lower income tax brackets. Right now, low earners pay little to no income tax on the income they generate. Under Trump’s plan, they still would pay no income tax, but now they would pay an additional tax on every single item they buy that was imported into the country.

According to the Office of the United States Trade Representative, the United States is the largest goods importer in the world, totaling $3.2 trillion imports in 2022. As of the end of May, the United States Treasury said it had collected $1.7 trillion in income tax revenue for 2024.

Which means that for Donald Trump to fully replace the revenue the United States government has received in just half a year from income taxes, he would need to levy a 53% tariff on imports. Given that the total figure once all income taxes for 2024 are collected will be much higher, a 53% tariff likely won’t come close to replacing all the money collected by the federal government.

The National Taxpayers Union estimates that Trump would have to impose a 71% tariff just to recoup losses from abolishing the income tax. Imagine a world where nearly everything costs almost twice as much, and that’s what Trump desperately wants to bring to America.

This is a truly terrible idea. Trump is obsessed with tariffs and rejects the fundamental economic reality that taxing products just makes them more expensive. It’s possible that he is floating this income tax repeal in a bid to make his tariff policy more attractive, but if anything, it makes it worse.

Conservatives theoretically are concerned about the national debt. The ebb and flow of this issue is such that they really only raise a stink over it when a Democrat is increasing the debt, but if a Republican is drastically reducing government revenue and thus increasing the debt by issuing tax cuts for the wealthy, then that’s just normal government business. It’s really not worth taking them at their word because it’s such a hypocritical stance they have demonstrated over the course of at least this quarter-century, but this is such a uniquely terrible plan and the math is so straightforward that it’s worth highlighting how this would impact one of the GOP’s favored talking points.

The U.S. government spent $659 billion just on interest payments on the debt in 2023, which was almost twice what the government paid two years prior. While us lefties are used to dismissing the national debt because conservatives use it as a cudgel to oppose any kind of program that does not further enrich the wealthy, the fact is that it does matter now that this large pile of debt has intersected with higher interest rates. Annual debt payments are becoming more onerous and they are a total waste of money.

From 1984 to 2017, the annual interest payment on the national debt was between $111 billion and $262 billion. In that range, the debt wasn’t as much of an issue because the interest payments were manageable. Now these interest payments are two and a half times larger than the 2017 payment, and Trump’s plan would further exacerbate this problem.

A 50% to 70% tariff is a non-starter politically, but let’s assume that Trump is able to enact his depraved economic vision with a still very high 30% tariff and no income tax. Remove $2.5 trillion in annual revenue, and based off the 2022 figure from the United States Trade Representative, a 30% tariff would bring in $960 billion, blowing a $1.54 trillion hole in the budget just to get back to where we currently stand.

The national debt is $34.68 trillion, which means that just switching from the progressive taxation we have enjoyed for a century to Trump’s cockamamie tariff-only plan would add $6.16 trillion to the national debt on its own. That figure is larger than the total debt of the United States government at the beginning of the century.

Last year’s interest rate on the debt payment came to around two percent, so just switching to this plan would cost the United States an extra $30 billion per year in interest payments alone. And remember, this is assuming no other additional debt is added. In his first term, prior to the COVID-19 crisis leading to unprecedented government support, Trump still increased the debt by about $4 trillion.

So basically, the baseline estimate for a Trump presidency should he get this insane idea through Congress (and whether it would violate the 16th Amendment is another issue) is that a Trump presidency would add, conservatively speaking, about $10 trillion to the national debt, costing America about $2 trillion just in interest payments over the course of Trump’s second term.

Really this is just another example of how Republicans do not care about the national debt when they’re running it up to serve their own causes. The debt is bad when we add to it to help people left behind by the economy, but when we’re adding to it in order to funnel more money into the coffers of millionaires and billionaires, then it’s not a problem. The notion that tariffs can replace income tax is a fantasy that requires a child’s understanding of the world to even float as a proposal, but such is life under Donald Trump. Even for him, this idea is a doozy.