If Trump is elected president, he’ll be very attractive – Robin Hood in reverse. His economic policies call for the transfer of trillions of resources from the poor and middle class to the rich, using only populism and grievances.
Trump constantly blames immigrants and foreigners for taking American jobs and burning factory towns in the heartland. But his attitude of blaming “outsiders” for all that ails America, while at the same time proposing cruel trade and immigration policies, will harm more than help US workers.
Trump’s 2024 tariff proposal — tariffs are taxes paid on imported goods — would take first-term policy into dangerous Smoot-Hawley territory, and would not burden low-income and middle-class Americans. People in that group had to spend all or most of their income to get by, while wealthier Americans were able to save their share. Tariffs raise the price of imports and domestic goods that compete with them, and that spend most or all of their income directly affected.
Economic research leaves no doubt that US tariffs burden Americans more than foreigners. They also tend to reduce trade and production; any benefits of job creation are generally more than offset by harms. For example, research shows that Trump’s tariffs from 2018-19 household costs about $800 per yearand studies are found job losses due to foreign retaliation but no discernible effect on employment in newly protected sectors. In the case of steel tariffs, creating a very modest job was dwarfed by the loss of the job several times higher in US industries that use steel as an input.
In addition, Trump’s envisioned draconian immigration policy — which he promised would be “the largest deportation operation in our country’s history” — would be first dangerous for the economic prosperity of the United States, not to mention adultery, tearing apart families and lives. Instead of businesses simply turning to “America” to fill the deportees, research shows that many of those jobs (and businesses) are lost — 88,000 for every 1 million people deported.
It is unsurprising that economic actors concluded that Trump’s trade and immigration proposals would create enormous “stagflationary” headwinds, increasing the risk of recessionary and inflationary pressures. Why did they pursue such dangerous and dangerous policies?
Blaming “other people” for economic pressures is a smoke and mirror distraction from another agenda, which runs deep. not popular with most Americans: cut taxes for the rich and corporations. Even though Trump claims he wants broad tax relief, when you do the math related to extending the first-term tax break, along with his proposed tariffs, most Americans will be worse off.
Except for the above.
Beyond the first-term tax cuts, Trump has vowed to cut the corporate tax rate again, to 15%disproportionately benefiting shareholders or capital owners. (Employment income tax, payroll tax and more rates for workers.)
Additionally, speculative plans to exempt Social Security from taxation, while seemingly good for all retirees, will mostly benefit wealthy retirees. the increasing fiscal pressure on the programrisking cuts to profits in the next year.
What about Trump’s proposal to exempt tips from the tax, which was echoed by the Harris campaign? Although it may benefit poorer workers, without serious hedges, it may open up new channels of tax avoidance. Both campaigns are probably more concerned with winning votes among service workers in the swing state of Nevada than with good tax policy principles.
The final danger with Trump’s fiscal agenda is that it will create a deeper hole in the budget deficit and debt, which are already very high. Trump’s tax agenda can easily cost $5 trillion or $6 trillion over the coming decadeand despite the desire to replace income taxes with tariffs, math, again, does not add up. And Trump has never shown much interest in reining in spending; his government was added more for national debt than what Biden has.
A potential Harris administration should not learn the wrong lessons from Trump. It is true that President Biden left many of Trump’s tariffs on China, although he failed to achieve changes in China’s trade practices. And the Biden-Harris administration imposed new tariffs on $18 billion of Chinese products. However, these new tariffs are targeted at less than 1% of the trade that Trump’s proposed tariffs are, and are focused on protecting key strategic domestic industries. The Biden-Harris administration firmly rejected the kind of broad tariffs that Trump has suggested. Harris rightly calls them the “Trump sales tax”.
America’s “kitchen table” economic problems cannot be solved by blaming foreigners and immigrants. Scapegoats are simple answers to complex problems that require strengthening the US foundation, thoughtful engagement with our trading partners and building a fairer tax system. Make no mistake, Trump’s proposal is snake oil, pure and simple.
Kimberly A. Clausing is the Eric M. Zolt Professor of Tax Law and Policy at the UCLA School of Law. He is deputy assistant secretary for tax analysis at the US Treasury during 2021-22.
