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Yesterday Donald Trump stated that he intends to use the revenue from tariffs to finance a significant cut in federal taxes.  He announced it with a terse post on his social network, Truth, in which he does not explain in detail how he intends to proceed. The tax cut: the bright side of Trump’s tariffs? It is not difficult to imagine how it intends to proceed.  In fact, if the revenues from the tariffs were to be substantial and continuous, they would produce an excess inflow into the coffers of the federal State. Therefore, if Trump were to opt for a tax cut, the lower revenues would already be covered by the higher revenues from the tariffs.  This would not mean a reduction in costs for taxpayers, as it would in fact only be a replacement of one tax with another, but it would partially shift taxation from income to consumption.  While on one hand it is true that tariffs are paid by companies exporting goods and services to the USA, these costs are obviously then passed on to American consumers who purchase those goods and services, so a large part of the cost of the tariffs is indeed paid by American consumers.  In other words, tariffs are in all respects a tax on the consumption of imported goods, while the federal taxes that Trump intends to cut are mainly those on income. So in the end, some consumers will find themselves paying more taxes, while others will pay less.  Trump’s statement: tariffs as a measure to reduce taxes The USA president wrote that, with the introduction of tariffs, the income taxes of many people will be substantially reduced. In fact, he even adds that they could be completely eliminated.  Obviously, his words should always be taken with a grain…

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Filed under: News - @ April 28, 2025 10:21 am