Payday for Public Choice.
Because it’s [the tariffs on Chinese goods] spread over thousands and thousands of products, nobody’s going to actually notice it at the end of the day.
This quote is from an interview of Commerce Secretary Wilbur Ross on CNBC’s Squawk Box last September.
And now here’s Alexander Hamilton in April 1782:
No mode [other than tariffs] can be so convenient as a source of revenue to the United States. It is agreed that imposts on trade, when not immoderate, or improperly laid, is one of the most eligible species of taxation. They fall in a great measure upon articles not of absolute necessity, and being partly transferred to the price of the commodity, are so far imperceptibly paid by the consumer.
What’s interesting, beyond their assertion that consumers won’t notice the slightly higher prices, is that both Hamilton and Ross use this an an argument for tariffs. We economists who apply Public Choice to understand government policy often point out that one reason tariffs are so popular is that they benefit a concentrated group (domestic producers) at the expense of a dispersed group (consumers.) It’s striking to see how upfront both Hamilton and Ross are at admitting that that is one of their arguments for tariffs.
READER COMMENTS
Thaomas
Feb 20 2019 at 3:34pm
But Hamilton had the excuse that in those days there were no obviously better ways to tax the consumption of high invoke people.
Of course neither Hamilton nor Ross seem to be aware of the Learner Symmetry theorem that restrictions/taxes on imports are also restrictions/taxes on exports.
David Henderson
Feb 20 2019 at 6:51pm
I think you mean “high income,” right?
So the justification you gave is a good one if the goal is revenue. What I’m focusing as a bad justification is that people won’t notice it much.
Good point about Lerner (not Learner). My guess is that you have autocorrect.
Michael Byrnes
Feb 21 2019 at 7:06am
Is “people won’t notice it much” bad as applied or bad in and of itself?
David Henderson
Feb 21 2019 at 11:52am
Bad as applied. Bad in itself? No. Because it’s simply a factual statement. I think, by the way, that it’s a factual statement that’s sometimes incorrect, but that’s a different issue.
David Henderson
Feb 21 2019 at 11:53am
Clarification: When I say “bad as applied,” I mean that it’s not a good argument for tariffs.
Thaomas
Feb 21 2019 at 8:29am
You are too generous. I am quite capable of making mistakes, unaided. 🙂
David Henderson
Feb 21 2019 at 11:53am
I can take the criticism of being “too generous” any day of the week and twice on Sundays. 🙂
Benjamin Cole
Feb 20 2019 at 7:13pm
In days of yore there may have been powerful domestic manufacturers who opposed imports.
But where does a Ford, GM an Apple stand today on global trade, let alone the BlackRocks or the Walmarts?
I think a reasonable case can be made that US foreign, trade, and military policy is dominated by the interests of multinationals.
This may be for better or worse than the old days when there might’ve been national manufacturers who stymied imports.
But we also have a situation in which the US military has arguably been converted into a global guard service for multinationals.
It is all of a piece.
PS if I had to choose between income taxes and tariffs, I think tariffs to get the nod.
Matthias Goergens
Feb 20 2019 at 9:12pm
If only the multinationals had as much sway.. they are much more neoliberal or even outright libertarian than what most countries actually get in their laws. Including tariffs.
John Kitchling
Feb 22 2019 at 9:38pm
Taxes are taxes of course, at some point they are going to be felt, but one thing I think people need to remember is that the tariff is applies ‘at the border’ not at the ‘register’ and so a 25% tariff on a $10 retail item is only $1 at the border. So its just a quarter. We’ve been paying far more in sales tax.
Comments are closed.