A Tariff and Tax Proposal

Kevin Williamson has proposed unilaterally eliminating all US tariffs.  It is a great idea.  Rand Paul proposed a flat tax.  As we said earlier the flat tax hits some retirees hard.  The some depends upon where they get their income form.  The Democrats and some others would like to raise the gas tax.

We have a modest tax proposal combining Williamson’s idea, the Democrats, and the need to be revenue neutral.  Here is an opportunity to be bipartisan.  Here is a way to improve incentives twice without spending a dollar.  We eliminate all tariffs, the death tax, and we double the gas tax from 18.4 cents to 37 (yes that is slightly more than double but we need a little extra and we like round numbers).  According to Progressive Economy,  federal revenue was  (in billions of dollars in 2012) $30 from tariffs, $11 from the death tax, and $39 from gas.  By slightly more than doubling the gas tax and figuring in a little savings from not enforcing tariffs and death tax we should net to revenue neutral.  Although individual outcomes will vary it is reasonably close to revenue neutral for individuals because is substitutes one regressive tax for another.

Sidebar: how liberals have changed – a quote taking about liberals in 1912 from Progressive Economy:

Liberals [in 1912] disliked the tariff system as non-transparent and – because high tariffs on clothes meant taxation of lower-income people – as regressive.

Now progressives like non-transparent taxes and are supportive of regressive taxes like tariffs, VAT, carbon taxes, and FICA.  The first three are both non-transparent and regressive.  End Sidebar

This proposal improves incentives twice by making trade free and gas (and diesel fuel for cars) more expensive.  You don’t have to be a warmist to see that making gas slightly more expensive (about 7%) is a reasonable act consistent with long-term success.  It will create incentives for market-based alternatives for transportation.

It is not monumental but eliminating tariffs and the death tax would be a real step forward.  Increasing the gas tax is not the worst idea and it could create bipartisan support for a simple way to improve the US economy.

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