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1872: The income tax was repealed after the Civil War debts were settled, and federal revenue needs declined.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.
I know that, like most Trump supporters, you think this TDS concept is enormously clever, but have you considered that political partisans have been describing their opponents as "crazy" for a few thousand years now.
so that makes it okay for you to act like a little baby girl who needs a nap? kk
Trump doesn’t understand much, babbles and parrots much of what people around him say. More than any other president he hangs out with morons so you get stuff like this gold standard etc coming out of his mouth that are not Evan
worth discussing as a hypothetical.
I know that, like most Trump supporters, you think this TDS concept is enormously clever, but have you considered that political partisans have been describing their opponents as "crazy" for a few thousand years now.
Not even all that long ago for that one. And the guy who coined BDS during the Bush years despised trump too 😀
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It's ok to say lbj passed the 64 tax cut.
Trump doesn’t understand much, babbles and parrots much of what people around him say. More than any other president he hangs out with morons so you get stuff like this gold standard etc coming out of his mouth that are not Evan
worth discussing as a hypothetical.
I tend to think it’s a mistake to dismiss anything he’s suggesting no matter how absurd it sounds
Donald Trump is an incredibly stupid man who doesn’t give two shits about policy. His priorities are self enrichment, power, and playing to his crowds
Which means he isn’t the one coming up with any kind of policy ideas, the people surrounding him put it in his ear and he blindly spouts it, and because he is the GOP nobody is going to cross him no matter how catastrophic or implausible the idea. This in particular would be difficult to implement but if trump wins the presidency then they’ll have taken the senate with the presidency and probably gotten more seats in the house while having a MAGA supermajority in SCOTUS
If he says it it doesn’t make sense to believe he won’t try it
The exception is when he accidently stream of consciousnesses himself into liberal policies. For example, at various points in the past he was just blabbering and said stuff about better gun control and maybe everyone should just have medicare. He quickly forgot those positions when he was reminded that they would be counterproductive for his grift machine.
Ron Paul actually floated this idea back in 2010. I think it's great, so long as you realize this isn't going to be revenue neutral. You'd probably need to reduce spending by 90% or so to make it workable. But with everyone being able to keep all the money off their paycheck, and without the inflationary pressures of deficit spending, you'd see a tremendous economic boom. And probably there would be less and less tax dollars raised every year so there would be more and more pressure to find spending cuts as things went on.
Although this would trigger and immediate debt crisis, with the massive drop in revenue relative to the unchanged size of the debt. Repudiation would be the best course going forward.
Ron Paul actually floated this idea back in 2010. I think it's great, so long as you realize this isn't going to be revenue neutral. You'd probably need to reduce spending by 90% or so to make it workable. But with everyone being able to keep all the money off their paycheck, and without the inflationary pressures of deficit spending, you'd see a tremendous economic boom. And probably there would be less and less tax dollars raised every year so there would be more and more pressure to find spen
Yes surely inflation wouldn’t go up if unis-toi out like 30% of money in people hands ….
As if only governments deficit would create inflation …
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.
All the great advantages you have being an American isn’t because of cities but the US as a whole with its reserve currency and military ….
Scrap that for cities tax and I’m not sure it will be as great as u think it would be .
Btw complaining about tax level in US is kinda of hilarious for foreigners.
The US never been known to be a medium to high level tax country …
Ron Paul actually floated this idea back in 2010. I think it's great, so long as you realize this isn't going to be revenue neutral. You'd probably need to reduce spending by 90% or so to make it workable. But with everyone being able to keep all the money off their paycheck, and without the inflationary pressures of deficit spending, you'd see a tremendous economic boom. And probably there would be less and less tax dollars raised every year so there would be more and more pressure to find spen
There is another element we haven't discussed related to imposing insane tariffs, which is that you won't be able to export much anymore if you do, because of retaliation.
And btw good luck at eliminating the deficit when a GOP trifecta didn't touch any entitlement recently.
Repudiation of the debt is unconstitutional btw (14a, s.4)
Yes surely inflation wouldn’t go up if unis-toi out like 30% of money in people hands ….
As if only governments deficit would create inflation …
In the described model they keep more of their income but they don't get medicaid, medicare and social security anymore (or if they do, only for a small fraction of what they are currently getting).
So working age people without current access to any of the 3 programs are far better off, many others are worse off.
Yes but still inflation would go through the roof shrug .
You basically increased demand by 30% and had a tax on goods of 10% and prices wouldn’t go up ?
The concept of People having more money into their hands necessarily always means they gain (wealth, purchasing power,etc.) is flawed .
Yes but still inflation would go through the roof shrug .
You basically increased demand by 30% and had a tax on goods of 10% and prices wouldn’t go up ?
The concept of People having more money into their hands necessarily always means they gain (wealth, purchasing power,etc.) is flawed .
no you don't increase demand 30%.
Americans pay approx 15% of GDP in federal taxes (income + everything else).
federal fiscal revenues in 2023 were 4.4 trillions. half was federal income taxes (2.2 trillions). American GDP was 27.3 trillions.
federal income taxes were 8% of American GDP. they aren't a socialist hellhole.
and when you put it to 0 to people earning 6 millions, they won't consume all the money you aren't violently sequestering from them anymore.
rich people will have more money on their hands which they will mostly save.
the rest will have more cash on one side, and less on the other.
Meh ok 15% on average not 30% , you are right .
https://taxfoundation.org/data/all/feder...
Still everything I said still hold .
More money in people hands just provide by tax cuts is identical to 2020 checks send to home .
They will lose it by inflation shrug .
You say rich people won’t create inflation because they invest it in S&P500 and the like but it’s still an inflationary impact on financial assets shrug .
Prices only go up because an influx of more money not because it produces more .
The point is the joy of no more tax will be short live when inflation kicks in aka 2021-22.
Ps: I know u hate socialism and called it an hellhole and praising the U.S. but personally I’m glad to pay like only 15% more tax and get an affordable health care and education system .
To me it ain’t evil at all .
It’s a community wealth we pay ourself with shrug .
Meh ok 15% on average not 30% , you are right .
https://taxfoundation.org/data/all/feder...
Still everything I said still hold .
More money in people hands just provide by tax cuts is identical to 2020 checks send to home .
They will lose it by inflation shrug .
You say rich people won’t create inflation because they invest it in S&P500 and the like but it’s still an inflationary impact on financial assets shrug .
Prices only go up because an influx of
the tax cuts were on deficit.
these wouldn't be , in the model described.
it would be more money in your pocket because of no federal income tax, but less money for healthcare and no pension (social security).
and it's 8% in 2023 not 15.
no medicaid, the poor's will pay healthcare out of pocket or die, and so on
the tax cuts were on deficit.
these wouldn't be , in the model described.
it would be more money in your pocket because of no federal income tax, but less money for healthcare and no pension (social security).
and it's 8% in 2023 not 15.
no medicaid, the poor's will pay healthcare out of pocket or die, and so on
Well I didn’t follow the whole discussion I guess .
I was referring to the thread title .
Me I read 15% no idea where u got 8% .
I’m sure poor people won’t see this as an hellhole afterwards 😀
Just let them die .
Ps: the economy is well calibrated, those tax cuts will have a similar increase in inflation or very close it unless people won’t spend that extra money .
Good luck with that ….
Well I didn’t follow the whole discussion I guess .
I was referring to the thread title .
Me I read 15% no idea where u got 8% .
I’m sure poor people won’t see this as an hellhole afterwards 😀
Just let them die .
15% of GDP is approx the total fiscal revenue of the federal government.
the federal government in the USA doesn't take only the federal income tax. that is approx half of it's total revenue.
corporate income tax, medicare payroll tax, social security payroll tax, tariffs that already exist and inheritance tax make up for the rest.
the proposal is to remove the federal income tax and make it up with far higher tariffs. which is impossible as explained.
but as explained it would mean far lower expenses.
and medicaid (healthcare for the poors) would be the first to go.
and removing the federal income tax ENTIRELY gives 8% of GDP on extra money to Americans.
but a lot of it is paid by really wealthy people, who already save. they won't consume it all.
they probably wont consume almost anything of it, they will just save more.
so the inflationary effect won't even be 8%, rather less
how many itt sharing opinions on US income tax policy are current US taxpayers?
15% of GDP is approx the total fiscal revenue of the federal government.
the federal government in the USA doesn't take only the federal income tax. that is approx half of it's total revenue.
corporate income tax, medicare payroll tax, social security payroll tax, tariffs that already exist and inheritance tax make up for the rest.
the proposal is to remove the federal income tax and make it up with far higher tariffs. which is impossible as explained.
but as explained it would mean far lower expens
Luciom with only about 1k per month in the hands of Americans inflation went up to 40 years high in 2021-22 near 9% ….
That is what happens when people have too much money in their hands .
To believe people won’t spend that money from tax cuts is a pipe dream …
That is what they do , that is why for decades even middle class with good wages couldn’t afford 1k emergency funds for years .
They spend !
Tax are deflationary and tax cut are inflationary.
This isn’t controversial .
Tax cuts aren't inflationary. Inflation is a monetary phenomenon, when the government increases the money supply and so the prices of everything go up. I guess tax cuts could be inflationary, if they occur simultaneously alongside deficits financed through borrowing from the banking system (but this would be the deficit that causes the inflation not the tax cuts, even if the tax cuts do in part cause the deficit). But with a balanced budget, there is no reason to believe that tax cuts would lead to inflation.
Luciom with only about 1k per month in the hands of Americans inflation went up to 40 years high in 2021-22 near 9% ….
That is what happens when people have too much money in their hands .
To believe people won’t spend that money from tax cuts is a pipe dream …
That is what they do , that is why for decades even middle class with good wages couldn’t afford 1k emergency funds for years .
They spend !
Tax are deflationary and tax cut are inflationary.
This isn’t controversial .
what do you mean "only 1k per month". 1k per month per 335M people is 4 trillion USD, approx double the total federal income tax revenue.
Deficits are inflationary and surpluses are deflationary, that's uncontroversial.
If you tax the rich for 1 trillion and give that to the poor that's very inflationary, because the rich weren't spending them, the poor would be.
If you cut taxes for 1 trillion and welfare for 1 trillion, that's deflationary, because welfare goes to the poors who have higher propensity to spend, taxes take from the rich who have higher saving propensity.
