New York Times, Trump’s Proposed Tax Cuts and Increased Tariffs Could Hurt Poorer Households:

When former President Donald J. Trump met with House Republicans last month, he touched on a mix of policies core to his economic agenda: cutting income taxes while also significantly raising tariffs on foreign goods.

Mr. Trump told Republicans he would “love to raise tariffs” and cut income taxes on Americans, potentially to zero, said Representative Marjorie Taylor Greene, Republican of Georgia.

“Everyone was clapping in the room,” Ms. Greene said. “He said, ‘If you guys are going to go vote on something today, vote to lower taxes on Americans.’”

Tariffs and tax cuts were central to Mr. Trump’s economic thinking while he was in the White House. If he wins in November, he is promising a much more aggressive approach, including potentially a blanket 10 percent tariff on nearly all imports and a 60 percent tax on Chinese goods.

Mr. Trump and his supporters say that mixing tariffs with tax cuts will revitalize American businesses and manufacturing, boosting jobs and benefiting working-class Americans. And they see tariffs on foreign products as a lucrative source of revenue, one that could be used to offset a drop in tax receipts.

Some economists have a different view, saying that cutting taxes while raising tariffs could have harmful consequences by widening the gap between the rich and the poor. Companies often pass on the cost of tariffs to consumers in the form of higher prices. As a result, economists say, lower-income households would be hit hardest by tariffs since they spend a greater share of their income on goods. Income taxes tend to fall more heavily on wealthier Americans since many low-income workers do not make enough money to owe federal income taxes.

Kimberly Clausing, an economist at the Peterson Institute for International Economics, who served in the Treasury Department under President Biden, said combining tax cuts and tariffs would increase income inequality substantially and “hurt the very voters that Trump is counting on to put him in the White House.”

The income tax “acts to reduce income inequality in our country by asking more for those at the top,” she said. “A tariff is never going to achieve that.” …

Stephen Moore, a Trump economic adviser, is ambivalent about raising tariffs. But if the revenue collected from doing so helps pay for cutting, if not eliminating, income taxes, he said, the trade-off could be worthwhile.

“I’m not a fan of tariffs, but if it were an across-the-board revenue tariff, and you use the revenue to reduce taxes that are harmful to growth, I think it could make sense,” he said. …

[A] 10 percent across-the-board tariff would not come close to replacing roughly $2 trillion in income tax the government collects annually. A study by Ms. Clausing and Maurice Obstfeld, also of the Peterson Institute, found that the maximum revenue the United States could earn from tariffs would peak at about $780 billion, less than 40 percent of what income taxes currently bring in [Can Trump Replace Income Taxes With Tariffs?]. …

Ms. Clausing and Mr. Obstfeld also calculated what would happen if the United States imposed enough tariffs to earn the maximum level of revenue, $780 billion, and then cut income taxes by a similar amount across all income groups. They found that the result would be a net 8.5 percent reduction in after-tax income for the lowest-earning 20 percent of Americans, compared with an 11.6 percent increase for the highest-earning 1 percent.

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