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A forklift transports shipping containers among stacks of containers in Hamburg Port in Hamburg, Germany, April 15, 2025.
Tariff Tax Base Questioned by Experts
Recent analyses by policy experts highlight doubts regarding the revenue potential of tariffs in comparison to income tax. Kimberly Clausing, a senior fellow at the Peterson Institute for International Economics, emphasized that the base for tariff taxation is significantly smaller than that of income tax.
In 2023, the United States imported goods valued at $3.1 trillion. This figure starkly contrasts with over $20 trillion in taxable income reported by the government, as outlined in a study Clausing contributed to earlier this year. In a statement made in late March, Peter Navarro, a trade advisor in the White House, projected annual tariff revenues could reach approximately $600 billion. However, this estimate has drawn skepticism; Mark Zandi, the chief economist at Moody’s, remarked that realizing even $100 billion to $200 billion would be a significant achievement.
Furthermore, data from the Treasury indicates that the Internal Revenue Service collected $1.14 trillion in individual income taxes for fiscal year 2025 up to March 31. Clausing’s report argues that for tariffs to effectively substitute for income tax, they would require unreasonably high rates applied to a limited base of imports.
Additionally, Clausing pointed out that increased tariffs could lead to reduced consumer spending on imported goods, further diminishing potential revenue. “That’s part of the point of the policy,” she commented.
Additional Dynamics Affecting Tariff Revenue
Experts caution that rising tariff rates can be counterproductive, potentially lowering overall revenue collected by the U.S. tax system. “The administration seems to think that every increase in the tariff rate will automatically result in more revenue,” observed Durante from the Tax Foundation, acknowledging that this assumption may not hold true.
According to a report by the Tax Foundation published on April 15, direct tariff revenue can be affected by various behavioral and economic factors. The foundation projected that a universal 10% tariff might generate about $2.2 trillion in revenue through 2034, although it would simultaneously reduce the U.S. gross domestic product by 0.4%, which could further impact revenue collection.
In a related development, the International Monetary Fund adjusted its growth projections for the U.S. in 2025 from 2.7% down to 1.8%, citing ongoing trade tensions as a significant contributing factor.
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