Where should the money collected from tariffs on China and others go: to the Treasury’s general fund, or back to individual taxpayers?
President Trump has instituted tariffs on hundreds of billions worth of foreign goods, especially from China. That means that when American individuals or companies import from China, they have to pay that tariff.
Currently, the extra money American individuals or companies pay when importing such surcharged goods goes into the Treasury Department’s general fund, where almost all taxes and revenue go, to pay for government expenditures and programs. But what if it went directly back to taxpayers instead, to spend as they choose?
What the bill does
The Tariff Rebate Act would take money collected through the tariffs and give it back to lower- and middle-income taxpayers in the form of a check.
Specifically, it would return the money in equal amounts to each taxpayer in the bottom three income brackets, which means anyone earning less than $84,200 as an individual or less than $168,400 as a couple filing jointly.
How much would that mean? One estimate calculated the rebate would be approximately $200 for an individual or $400 for a couple. (That’s using figures of $38.9 billion in money from tariffs, spread out over 193 million people.)
What supporters say
Supporters argue that that bill preserves the macro goal of the tariffs — to force countries to come to the bargaining table in reaching better trade deals with the U.S. — while preventing hurt to individual taxpayers on a micro level.
“We’ve added tariffs on various countries, various products, over the last two years. The Treasury Department has taken in tens of billions of dollars,” Sen. Cotton said on CNBC’s Squawk Box. “Those tariffs are primarily designed to get us better trade deals with those countries: to protect our jobs, our farmers, our ranchers, our foresters.”
“But there is that money in the Treasury Department now, and I think a good side effect of it could be turning that money back to American families,” Sen. Cotton continued. “To the extent that this could have an impact on America’s families, here’s a rebate check of several hundred dollars, so we can both try to use those tariffs to get better trade deals, but also not to hit Americans in their pocketbooks.”
What opponents say
Opponents counter that the legislation is an apologetic attempt to stifle the worst effects of what they perceive to be President Trump’s disastrous trade policies.
“It’s not only bad economics but it also comes across as hush money to keep tariff victims silent in advance of the next election,” wrote Veronique de Rugy of George Mason University’s Mercatus Center.
“Up until now, Cotton has bent over backward to defend President Donald Trump’s trade war. He even defended the tariffs by claiming they inflicted no pain on consumers or farmers,” de Rugy noted. “But this bill suggests that he has changed his tune. He’s contradicting one of the administration’s main talking points — namely, that the tariffs are paid by the Chinese. Obviously, anyone who understands economics knows that American consumers pay most of the tariff costs.”
Odds of passage
The bill has not yet attracted any Senate cosponsors, although it’s also only been out for about two weeks. It awaits a potential vote in the Senate Finance Committee.
Presumably, odds of passage in the Republican-controlled Senate are reasonable. But what about in the Democratic-controlled House? Trump-supporting Washington Post columnist Henry Olson suggested the political winds could potentially strongarm the party into support.
“Trump would also put House Speaker Nancy Pelosi and the Democratic presidential contenders in a bind if he endorsed and pushed it,” Olson wrote. “Democrats already are caught between free-traders and protectionists in their own coalition, so they can’t take a purist free-trade position and simply call for Trump to end his trade war with China.”
“Trump could challenge them to put aside partisan rancor and do something good for everyone. And what would they say in response?” Olson asked. “That they’d rather use the increased tariff revenue to cut the deficit or put it toward more domestic programs? That’s a political loser, and they would know it.”