A tariff is essentially a sales tax. (1 Viewer)

[WisconIndependent]

Trump talks about how much money we are making with tariffs, and we can replace the income tax with the money we make from tariffs, which essentially are just sales taxes on goods. And sales taxes and tariffs are what economists call regressive taxes. As a percentage of income, they lean heaviest on those with lower incomes. And if these tariffs work to bring manufacturing back to the USA, they eventually will be reduce the income they provide and then how do we pay for government? Either we will have to reinvent the income tax or just change to a sales tax.

 

[Airyaman]

Well yes and no. It's a sales tax on the companies who buy from importers, but not always a sales tax on consumers (but the likely hood of passthrough is pretty substantial).

 

[Xilnik]

Well yes and no. It's a sales tax on the companies who buy from importers, but not always a sales tax on consumers (but the likely hood of passthrough is pretty substantial).

I don't see corporations today absorbing those losses long-term. Some are currently doing so, which already surprises me, but I do not expect that to last if the tariffs remain in place for a substantial period of time.

If tariffs aim to bring manufacturing back to the U.S., the increased costs for raw materials and components will eventually strain supply chains and reduce the competitiveness of American industries. In the long term, corporations are unlikely to absorb these costs, leading to higher prices for consumers. As mentioned in the OP, this hits low-income households the hardest. If we want to truly strengthen US manufacturing, we should also explore alternative policies like targeted subsidies, tax incentives, and investments in infrastructure and workforce training to provide production without laying the burden on consumers.

 

[WorldWatcher]

Well yes and no. It's a sales tax on the companies who buy from importers, but not always a sales tax on consumers (but the likely hood of passthrough is pretty substantial).

Which makes it essentially and embedded tax.

WW

 

[Helix]

I mean duh

 

[Airyaman]

I don't see corporations today absorbing those losses long-term. Some are currently doing so, which already surprises me, but I do not expect that to last if the tariffs remain in place for a substantial period of time.

These corporations are choosing to absorb the costs because they can, and they are doing so to keep or increase their own market share. Don't forget for years that Amazon was losing money but they eventually started turning profits as they increased market share.

Walmart to Absorb Tariff Hikes to Keep Prices Low - TT

As tariff-spooked shoppers begin pulling back on spending, Walmart is prepping for a worsening economy by using its massive footprint to keep prices low and hunt for ways to take market share.

www.ttnews.com

What we will see is likely a bunch of small businesses going belly up if the trade war continues for much longer, and Walmart, Amazon, etc. will grow even larger.

 

[ttwtt78640]

A tariff is unlike a sales tax since it’s included in the sales price, instead of added on. A tariff (unlike a sales tax) is applied to the (imported) product’s wholesale price, rather than to the retail price.

 

[Airyaman]

A tariff is unlike a sales tax since it’s included in the sales price, instead of added on. A tariff (unlike a sales tax) is applied to the (imported) product’s wholesale price, rather than to the retail price.

What is sales tax?

From examples to how it works per state, learn how important sales tax is for your business.

tax.thomsonreuters.com

Tariffs are based on what the company paid (value) for the imported good -- or a percentage of the purchase price -- so yes, sales tax.

 

[ttwtt78640]

I don't see corporations today absorbing those losses long-term. Some are currently doing so, which already surprises me, but I do not expect that to last if the tariffs remain in place for a substantial period of time.

If tariffs aim to bring manufacturing back to the U.S., the increased costs for raw materials and components will eventually strain supply chains and reduce the competitiveness of American industries. In the long term, corporations are unlikely to absorb these costs, leading to higher prices for consumers. As mentioned in the OP, this hits low-income households the hardest. If we want to truly strengthen US manufacturing, we should also explore alternative policies like targeted subsidies, tax incentives, and investments in infrastructure and workforce training to provide production without laying the burden on consumers.

Hmm… does that (bolded above) assume that federal income taxpayers aren’t consumers?

 

[Callen]

These corporations are choosing to absorb the costs because they can, and they are doing so to keep or increase their own market share. Don't forget for years that Amazon was losing money but they eventually started turning profits as they increased market share.

Walmart to Absorb Tariff Hikes to Keep Prices Low - TT

As tariff-spooked shoppers begin pulling back on spending, Walmart is prepping for a worsening economy by using its massive footprint to keep prices low and hunt for ways to take market share.

www.ttnews.com

What we will see is likely a bunch of small businesses going belly up if the trade war continues for much longer, and Walmart, Amazon, etc. will grow even larger.

That article was early days of the tariffs as CEO's were digesting impacts. Recently CEO's were more pointed on the impacts. They will absorb where they can but say they can't afford to absorb them all . The impact of empty shelves will not do anything to increase market share.

"The CEOs of Walmart and Target issued warnings to President Trump, emphasizing that his aggressive trade policies could lead to significant disruptions in supply chains. They cautioned that such disruptions might result in empty store shelves and price hikes within weeks. A source revealed that Trump was told, “the shelves will be empty”.

Beyond the threat of empty shelves, the retailers publicly warned that tariffs could lead to higher prices for consumers. Walmart expressed a reluctance to raise prices but acknowledged that "there will likely be instances where prices will rise for consumers." Target echoed this sentiment, indicating that price increases were probable."

 

[Xilnik]

These corporations are choosing to absorb the costs because they can, and they are doing so to keep or increase their own market share. Don't forget for years that Amazon was losing money but they eventually started turning profits as they increased market share.

Walmart to Absorb Tariff Hikes to Keep Prices Low - TT

As tariff-spooked shoppers begin pulling back on spending, Walmart is prepping for a worsening economy by using its massive footprint to keep prices low and hunt for ways to take market share.

www.ttnews.com

What we will see is likely a bunch of small businesses going belly up if the trade war continues for much longer, and Walmart, Amazon, etc. will grow even larger.

They can absorb the costs for now, but as I added to my previous post (edited after you posted above), that is a short-term strategy. Over time, the strain on supply chains and increased costs for raw materials will reduce competitiveness and force companies to pass those costs onto consumers. This is why I believe the current approach is backwards; subsidies for factories, tax exemptions for US manufacturing, and workforce training programs should have been implemented first to create a stronger foundation before imposing tariffs.

 

[ttwtt78640]

They can absorb the costs for now, but as I added to my previous post (edited after you posted above), that is a short-term strategy. Over time, the strain on supply chains and increased costs for raw materials will reduce competitiveness and force companies to pass those costs onto consumers. This is why I believe the current approach is backwards; subsidies for factories, tax exemptions for US manufacturing, and workforce training programs should have been implemented first to create a stronger foundation before imposing tariffs.

Funded by ???

 

[Xilnik]

Hmm… does that (bolded above) assume that federal income taxpayers aren’t consumers?

That is a valid point that any government-funded program will ultimately be paid by income taxes from the same consumers. However, that strain is divided more evenly across other tax brackets to impose less burden on low-income households, and the overall benefits to the economy would provide a better future for all Americans. By increasing domestic production, creating jobs, and boosting competitiveness, these measures aim to strengthen the economy as a whole. Over time, this could reduce reliance on imports, stabilize supply chains, and make goods more affordable for everyone.

Additionally, the government could look at funding these initiatives by reallocating existing budgets or cutting inefficiencies in smarter ways than the DOGE attempted, rather than imposing new taxes. The goal is to balance support for manufacturing without disproportionately hurting middle and low-income taxpayers or consumers.

 

[Uncensored2008]

Trump talks about how much money we are making with tariffs, and we can replace the income tax with the money we make from tariffs, which essentially are just sales taxes on goods. And sales taxes and tariffs are what economists call regressive taxes. As a percentage of income, they lean heaviest on those with lower incomes. And if these tariffs work to bring manufacturing back to the USA, they eventually will be reduce the income they provide and then how do we pay for government? Either we will have to reinvent the income tax or just change to a sales tax.

Not correct.

Some or all of a tariff might be passed on to consumers. But the tariff is not universal. If you buy an iPhone from China, there will be a tariff, Should you buy a phone made in America - if such a thing existed - there is no tariff. A sales tax would affect all items sold, regardless of source.

Obviously the objection the left has to indirect taxes is that they are universal. The Soros, Cook, and Buffett type Oligarchs can't buy the tax code with tariffs the way they do with income taxes to ensure they are exempt. Indirect taxes are fair taxes, which goes against what the left believes in.

 

[trumptman]

Trump talks about how much money we are making with tariffs, and we can replace the income tax with the money we make from tariffs, which essentially are just sales taxes on goods. And sales taxes and tariffs are what economists call regressive taxes. As a percentage of income, they lean heaviest on those with lower incomes. And if these tariffs work to bring manufacturing back to the USA, they eventually will be reduce the income they provide and then how do we pay for government? Either we will have to reinvent the income tax or just change to a sales tax.

Just to clarify why would we need the same level of government if we have thriving industry, employed people, good homes, good families and good outcomes?

Your premise is that we all exist for the purpose of funding government. The government is supposed to exist for the purpose of serving us and it should get out of the way to the maximum degree possible so that we can pursue our happiness.

If we are successful in pursuing that happiness the problem isn’t “who’s going to keep funding government to fix non existent problems.”

The real fear exposed in your premise is what if people determine they just don’t need that much government in their lives. What will all the DEI and middle managers and Karen’s of the world do then for their validation and employment?

The answer is hopefully something else and something that doesn’t involve controlling and dictating to their fellow Americans and humans.

 

[ttwtt78640]

That is a valid point that any government-funded program will ultimately be paid by income taxes from the same consumers. However, that strain is divided more evenly across other tax brackets to impose less burden on low-income households, and the overall benefits to the economy would provide a better future for all Americans. By increasing domestic production, creating jobs, and boosting competitiveness, these measures aim to strengthen the economy as a whole. Over time, this could reduce reliance on imports, stabilize supply chains, and make goods more affordable for everyone.

Additionally, the government could look at funding these initiatives by reallocating existing budgets or cutting inefficiencies in smarter ways than the DOGE attempted, rather than imposing new taxes. The goal is to balance support for manufacturing without disproportionately hurting middle and low-income taxpayers or consumers.

Hmm… do federal subsidies lower prices or simply change who pays them?

 

[BabaVoss]

Trump’s view is that we can make money by charging ourselves more for stuff we import.

Maths are hard for some, I guess,

 

[BabaVoss]

Just to clarify why would we need the same level of government if we have thriving industry, employed people, good homes, good families and good outcomes?

Your premise is that we all exist for the purpose of funding government. The government is supposed to exist for the purpose of serving us and it should get out of the way to the maximum degree possible so that we can pursue our happiness.

If we are successful in pursuing that happiness the problem isn’t “who’s going to keep funding government to fix non existent problems.”

The real fear exposed in your premise is what if people determine they just don’t need that much government in their lives. What will all the DEI and middle managers and Karen’s of the world do then for their validation and employment?

The answer is hopefully something else and something that doesn’t involve controlling and dictating to their fellow Americans and humans.

You should read “Lord of the Flies”.

 

[trumptman]

You should read “Lord of the Flies”.

I should base my understanding of reality on fiction?

Tongan castaways - Wikipedia

en.wikipedia.org

I prefer reality. You should too.

 

[BabaVoss]

I should base my understanding of reality on fiction?

Tongan castaways - Wikipedia

en.wikipedia.org

I prefer reality. You should too.

No. But you should read it. Literature has a lot of value, even when it is fiction.

 

[dmpi]

Does it really matter who (as in consumers, importer or exporters) absorbs the cost of tariffs? And the 'cost of tariffs' isn't really a cost since it funds the goverment. I see it as encouraging/empowering the people to be a better informed consumers instead of figuring out how to game the tax code we'll all be working on getting more value out of what we buy. That's a deflationary process that's going to help everyone. Also since there's no tariff tax on US products that's going to encourage to us generate USA jobs and to buy local and not ship stuff all over the world using up fuel and generating unnecessary pollution. Also as I point out before, I think there is such as thing as being too cheap and/or too disposable. How many giant $300 TVs do we really need? It encourages over-consumption and waste. Our landfills are already full of cheap Chinese dollar store junk. We don't want to be known as the landfill nation which is what we're quickly becoming.

 

[Xilnik]

Not correct.

Some or all of a tariff might be passed on to consumers. But the tariff is not universal. If you buy an iPhone from China, there will be a tariff, Should you buy a phone made in America - if such a thing existed - there is no tariff. A sales tax would affect all items sold, regardless of source.

Obviously the objection the left has to indirect taxes is that they are universal. The Soros, Cook, and Buffett type Oligarchs can't buy the tax code with tariffs the way they do with income taxes to ensure they are exempt. Indirect taxes are fair taxes, which goes against what the left believes in.

Tariffs and sales taxes are both forms of indirect taxation, but they function differently in practice. Tariffs target specific imported goods and can incentivize domestic production but also increase costs for manufacturers reliant on imported materials. These costs often trickle down to consumers, disproportionately affecting low-income households, making tariffs regressive in their impact in similar ways to sales taxes.

However, the argument that tariffs are "fair taxes" because they can't be manipulated by wealthy individuals is worth exploring. You are correct that tariffs apply uniformly to imported goods, but their effectiveness depends on broader economic factors, such as the availability of domestic alternatives and the ability of corporations to absorb or pass on costs. Additionally, corporations often seek ways to mitigate tariff impacts. For example, they may move parts of their manufacturing to countries with lower operating expenses or favorable trade agreements, potentially reducing overall production costs (e.g. Apple's manufacturing plans in India). Tariffs are applied based on the country of origin, but companies can still create strategies to lower costs on final products at the expense of complicating supply chains or undermining the intended effects of tariffs to incentivize domestic manufacturing.

In contrast, sales taxes apply universally, regardless of the source of goods, which can create a more predictable revenue stream but also exacerbate inequality.

Ultimately, the challenge lies in balancing revenue generation with equity. If tariffs are intended to replace income taxes, we need to consider their long-term sustainability. The focus needs to be on reducing imports and reshoring manufacturing. Without careful planning, this could lead to a shortfall in government funding, requiring other taxes to fill the gap. The end result is why there are currently concerns about a looming recession.

 

[Uncensored2008]

I don't see corporations today absorbing those losses long-term. Some are currently doing so, which already surprises me, but I do not expect that to last if the tariffs remain in place for a substantial period of time.

The left is economically illiterate. The basic value proposition is a fundamental law of economics. If the consumer finds that a product provides less value to them than the product costs, they won't buy it.

Apple enjoys a 280% gross margin on their phones because they are a Chinese company and use slave labor, while free of any environmental or workplace regulations. Substantially raising prices of their product will break the value proposition, so the likelihood is that they will indeed absorb most, if not all of the tariffs - and still enjoy massive profit levels.

If tariffs aim to bring manufacturing back to the U.S., the increased costs for raw materials and components will eventually strain supply chains and reduce the competitiveness of American industries. In the long term, corporations are unlikely to absorb these costs, leading to higher prices for consumers.

Not necessarily. Some materials, such as cobalt and lithium are widely available in America but have not been used due to political restrictions. One goal of tariffs is to equalize markets. The mines China runs in Africa have no environmental or safety restrictions, allowing China to severely undercut American materials, where safety and environmental concerns are high. The tariffs not only help American workers, but also the environment.

As mentioned in the OP, this hits low-income households the hardest.

Not true. Those who engage in the greatest consumption will pay the most in consumption based revenue models such as tariffs.

If we want to truly strengthen US manufacturing, we should also explore alternative policies like targeted subsidies,

No, these are foolish propositions that fuel the stagnation and decline we see in Europe.

tax incentives, and investments in infrastructure and workforce training to provide production without laying the burden on consumers.

More fascist intertwining of government and industry is not an answer.

 

[BabaVoss]

Does it really matter who (as in consumers, importer or exporters) absorbs the cost of tariffs?

Does it matter if prices rise? Yes.

And the 'cost of tariffs' isn't really a cost since it funds the goverment.

?? That's still a cost.

I see it as encouraging/empowering the people to be a better informed consumers instead of figuring out how to game the tax code we'll all be working on getting more value out of what we buy.

By paying more?

That's a deflationary process that's going to help everyone.

Um, no. Rising prices is not deflationary.

Also since there's no tariff tax on US products that's going to encourage us generate USA jobs and to buy local and not ship stuff all over the world using up fuel and generating unnecessary pollution.

But we don't manufacture a lot of what we buy.

Also as I point out before, I think there is such as thing as being too cheap and/or too disposable. How many giant $300 TVs do we really need? It encourages over-consumption and waste. Our landfills are already full of cheap Chinese dollar store junk. We don't want to be known as the landfill nation which is what we're quickly becoming.

I agree with you here. We need regulation for that.

 

[BabaVoss]

The left is economically illiterate.

The right is saying that by charging ourselves more for what we import, we are making money.

THAT is economic ignorance writ large.