Replacing income tax with tariffs
A story making the rounds right now is that Trump proposed eliminating the federal income tax and replacing it with tariffs. I don't think this will happen but it does make me reflect again on the idea of income taxes and the history of income taxes.
ChatGPT History:
Pre-Civil War Era: Early Taxation Efforts
1789-1800: The U.S. government primarily relied on tariffs and excise taxes for revenue. Alexander Hamilton, the first Secretary of the Treasury, introduced these as part of his financial plan.
1794: The Whiskey Rebellion was a direct response to the first excise tax on domestically produced distilled spirits, highlighting early resistance to federal taxation.
Civil War and Introduction of Income Tax
1861: To fund the Civil War, Congress passed the Revenue Act, introducing the first federal income tax at 3% on incomes over $800.
1862: The Revenue Act was revised to include a progressive tax structure, ranging from 3% to 5% on incomes above $600, and established the Office of the Commissioner of Internal Revenue.
1872: The income tax was repealed after the Civil War debts were settled, and federal revenue needs declined.
Gilded Age and Push for Tax Reform
1894: The Wilson-Gorman Tariff Act introduced a 2% tax on incomes over $4,000, which was aimed at addressing income inequality.
1895: The Supreme Court, in Pollock v. Farmers' Loan & Trust Co., declared the income tax unconstitutional as a direct tax not apportioned according to state populations.
16th Amendment and Permanent Income Tax
1909: Congress passed the 16th Amendment, allowing for the federal income tax without apportioning it among the states or basing it on Census data.
1913: The 16th Amendment was ratified, and Congress enacted a new income tax law with rates ranging from
1% to 7% on incomes above $3,000 for individuals and $4,000 for married couples.
World War I and Expansion
1917-1918: To fund World War I, the War Revenue Act significantly increased income tax rates, with top rates reaching 77% on incomes over $1 million. The number of taxpayers expanded significantly.
1920s: Post-war, tax rates were reduced during the Harding and Coolidge administrations, favoring economic growth.
Great Depression and New Deal
1930s: The economic collapse led to increased federal spending. The Revenue Act of 1932 raised tax rates again, and the New Deal expanded federal programs funded by taxes.
1935: The Social Security Act introduced a payroll tax to fund the new social insurance program.
World War II and the Modern Income Tax
1942: The Revenue Act of 1942 expanded the tax base, lowered exemptions, and introduced withholding from wages. The top tax rate rose to 94% on incomes over $200,000.
1943: The Current Tax Payment Act mandated withholding from wages, making income tax collection more efficient.
Post-War Era and Tax Reforms
1950s-1960s: High marginal tax rates persisted, but the economy grew. Tax policy focused on economic stability and funding the Cold War.
1964: The Revenue Act of 1964, influenced by President Kennedy, cut top marginal rates from 91% to 70%.
1981: The Economic Recovery Tax Act under President Reagan reduced the top rate from 70% to 50%.
Tax Reform Act of 1986
1986: The Tax Reform Act, a significant overhaul, simplified the tax code, reduced the number of tax brackets, and lowered the top rate to 28% while broadening the tax base.
1990s-2000s: Adjustments and Surpluses
1990: The Omnibus Budget Reconciliation Act raised the top rate to 31% and introduced a phased-out exemption for high earners.
1993: The Omnibus Budget Reconciliation Act of 1993 increased the top rate to 39.6% under President Clinton, contributing to budget surpluses.
2001 & 2003: The Economic Growth and Tax Relief Reconciliation Act and Jobs and Growth Tax Relief
Reconciliation Act under President George W. Bush cut rates across all brackets and introduced tax cuts.
Recent Developments
2010: The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act extended the Bush-era tax cuts.
2013: The American Taxpayer Relief Act raised the top rate to 39.6% for incomes over $400,000.
2017: The Tax Cuts and Jobs Act under President Trump reduced the top rate to 37%, doubled the standard deduction, and capped the state and local tax (SALT) deduction at $10,000.
2021: The American Rescue Plan provided direct payments and extended tax credits, increasing federal spending to address the COVID-19 pandemic.
Current Trends and Debates
2024: Discussions continue over tax policy, including proposals for higher taxes on wealthy individuals and corporations, addressing inequality, and managing national debt.
How can you replace an income tax with a tax on imports and exports? Is this another one of those "let's all drink bleach and eat horse de-wormer to cure teh Covid" Trump ideas?
sorry d2...that was mean but you walked into it
Trump discussed abolishing income taxes and making up
for all the lost revenue purely through taxes on imported goods.
Trump’s idea would raise taxes by $5,000 for a typical family while
cutting taxes for the average family in the top 0.1% by $1.5 million.
his proposal would destroy the wallet of the average American, throw the
global economy into discord and provide a huge monetary boon to the wealthy.
Trump discussed abolishing income taxes and making up
for all the lost revenue purely through taxes on imported goods.
Trump’s idea would raise taxes by $5,000 for a typical family while
cutting taxes for the average family in the top 0.1% by $1.5 million.
his proposal would destroy the wallet of the average American, throw the
global economy into discord and provide a huge monetary boon to the wealthy.
This sounds like it might be even dumber than most of his other ideas, and that's a pretty high bar to clear.
Trump discussed abolishing income taxes and making up
for all the lost revenue purely through taxes on imported goods.
Trump’s idea would raise taxes by $5,000 for a typical family while
cutting taxes for the average family in the top 0.1% by $1.5 million.
his proposal would destroy the wallet of the average American, throw the
global economy into discord and provide a huge monetary boon to the wealthy.
I'm always curious about how these scenarios are run so quickly. Can we citizens have access to the US tax excel model? I'd like to run some tests. Seriously though, its hard to believe what some CNBC analyst fake quant came up with in a matter of days. How can they be implementing all proposed changes to govt spending that they don't even know about to produce these results....that article means nothing
I'm always curious about how these scenarios are run so quickly. Can we citizens have access to the US tax excel model? I'd like to run some tests. Seriously though, its hard to believe what some CNBC analyst fake quant came up with in a matter of days. How can they be implementing all proposed changes to govt spending that they don't even know about to produce these results....that article means nothing
I think Trump's plan is that instead of taxing you 30% of the money you make shoveling horse manure or whatever it is you do, he's going to make that money up by charging you more for a pair of Nikes.
Nikes might be a bad example. Anyway, it's a ****ing terrible idea and your boy Trump is an abject moron.
It's not an actual idea, it's like when democrats talk about giving medicaid to illegals then they don't do it where they govern.
It's a boutade, a signaling discourse, not a practical proposal
no no no...trust me. the people will buy the Nikes no matter the cost. My spending habits have never been close to average
People but fewer avocados if their prices go 3x and other produce prices "only" grow 20-30%.
People change their cars less often if they cost more. And so on.
Even a Nike enthusiasts would buy fewer Nikes if they cost 3x.
And then there is the "problem" of Nikes and the rest starting to be produced in the USA (which I know is the intended outcome) but then you don't have a tax base anymore.
It's similar to localities funding basic expenses with speed and parking tickets. You can go broke when people change habits
Yes and it would be insane even if you could because it's volatile and people change habits (including producers)
Right. In other words, it's a dumb ****ing idea any way you twist it. Which is what I said.
The depths of Trump's stupidity never cease to amaze me. There are amoeba on Mars with more functioning brain cells than he has.
People but fewer avocados if their prices go 3x and other produce prices "only" grow 20-30%.
People change their cars less often if they cost more. And so on.
Even a Nike enthusiasts would buy fewer Nikes if they cost 3x.
And then there is the "problem" of Nikes and the rest starting to be produced in the USA (which I know is the intended outcome) but then you don't have a tax base anymore.
It's similar to localities funding basic expenses with speed and parking tickets. You can go broke when people
so we end up producing more locally, taxing more locally, and deciding more locally what taxes are spent on all the while the federal government has to be weined off the infinite money gravy train?
so we end up producing more locally, taxing more locally, and deciding more locally what taxes are spent on all the while the federal government has to be weined off the infinite money gravy train?
You don't tax more locally, you removed the federal income tax remember? Or you mean you increase state taxes a lot while reducing fiscal federal revenue and expenses? That's a plan but it's a very different one
yeah but that would change and states/bigcity would implement new local taxes. I'm fine with local taxes. What I don't like is writing a 6 figure check to the federal government every year and that money going to a Ukrainian pension, war, Biden's cocaine, etc.
