President Donald Trump, having championed one of the larger tax cuts in recent years, has now enacted tariffs equivalent to one of the largest tax increases in decades.
A CNBC analysis of data from the Treasury Department ranks the combined $72 billion in revenue from all the president’s tariffs as one of the biggest tax increases since 1993. In fact, the tariff revenue ranks as the largest increase as a percent of GDP since 1993 when compared with the first year of all the revenue measures enacted since then, according to the data.
Only the revenue raised in the fourth year of the Affordable Care Act is greater, but not by much.
The nonpartisan Tax Foundation estimates all the tariffs enacted by the president, including the latest increase from 10% to 25% on $200 billion on Chinese goods, will raise $72 billion in revenue, equal to 0.34% of U.S. gross domestic product. Revenue raised in the first year of the 1993 budget and reconciliation act equaled 0.36% of GDP.
“It’s certainly not the largest tax increase in history but it does rank among some of the bigger tax proposals over the last 20 years that have raised revenues,” said Kyle Pomerleau, chief economist with the Tax Foundation.
The revenue raised from the tariffs is more than the tax increases from the first three years of the Obama administration’s ACA, according to the Treasury data. Only in year four of the ACA, when revenue rose by an estimated 0.46% of GDP, did it raise more than the estimate from Trump’s tariffs.
Of course, there are key differences between a tax cut and tariffs.
Trump says Chinese companies pay the tariffs, but most economists see them being borne by U.S. businesses and consumers. That is, they are essentially a tax increase. Over time, however, consumers and businesses can reduce this tax hit by substituting away from high-priced goods and Chinese production. Some of that production could come back to the U.S. or simply move to other countries.
Kent Smetters of the Penn-Wharton Budget Model and a former Treasury official during the Bush administration, estimates that the tariff increase will cost the median U.S. household with earnings of $61,000 about $500 to $550 a year. It’s the equivalent, he said, of raising the Social Security retirement tax by 1 percentage point to 11.6%.
Such a large revenue measure, according to Pomerleau, if it were a tax, would have been subject to considerable economic analysis from the Congressional Budget Office or the Joint Committee on Taxation for the potential effects on growth, inflation and jobs. No such analysis has been offered or is believed to have been conducted by the administration regarding the current tariffs.
And the revenue measure is by far the largest enacted without congressional approval. Congress, in a series of laws, has ceded to the president vast powers to levy tariffs.
Hong Kong police briefly turn water cannon on protesters, fire tear gas
Protesters gather in Kwai Fong in Hong Kong on August 24, 2019.
LILLIAN SUWANRUMPHA | AFP | Getty Images
Hong Kong police briefly fired water cannon and volleys of tear gas to force back brick-throwing protesters on Sunday after violent clashes a day earlier during which police also fired tear gas for the first time in more than a week.
At least one petrol bomb was thrown by protesters. The water cannon, which had not been used in years of anti-government protests, soon pulled away.
The Chinese-ruled city’s MTR rail operator suspended some services to try to prevent people gathering but protesters made it to a sports stadium in the vast container port of Kwai Chung, from where they marched to nearby Tsuen Wan.
Some dug up bricks from the pavement and wheeled them away to use as ammunition, others sprayed detergent on the road to make it slippery for the lines of police. Clashes spread in many directions.
Police had warned earlier they would launch a “dispersal operation” and told people to leave.
“Some radical protesters have removed railings … and set up barricades with water-filled barriers, bamboo sticks, traffic cones and other objects,” they said in a statement.
“Such acts neglect the safety of citizens and road users, paralysing traffic in the vicinity,” the statement said.
Activists threw petrol bombs and bricks on Saturday in the gritty industrial district of Kwun Tong, on the east of the Kowloon peninsula.
The vast majority marched peacefully on Sunday.
M. Sung, a 53-year-old software engineer in a black mask emblematic of the many older, middle-class citizens at the march, said he had been at almost every protest and would keep coming.
“We know this is the last chance to fight for ‘one country, two systems’, otherwise the Chinese Communist Party will penetrate our home city and control everything,” he said.
“If we keep a strong mind, we can sustain this movement for justice and democracy. It won’t die,” Sung said.
Protesters say they are fighting the erosion of the “one country, two systems” arrangement under which the former British colony returned to China in 1997 with the promise of continued freedoms not enjoyed on the mainland.
The protests, which started over a now-suspended extradition bill and evolved into demands for greater democracy, have rocked Hong Kong for three months and plunged the city into its biggest political crisis since the handover.
They also pose a direct challenge for Communist Party leaders in Beijing, who are eager to quell the unrest ahead of the 70th anniversary of the founding of the People’s Republic of China on Oct. 1.
Beijing has sent a clear warning that forceful intervention is possible, with paramilitary forces holding drills just over the border.
Transport to the airport appeared normal on Sunday, despite protesters’ plans for a day-long “stress test” of transport in the international aviation and financial hub.
Police said they strongly condemned protesters “breaching public peace” and that 19 men and 10 women had been arrested after Saturday’s violence. More than 700 have been arrested since the demonstrations began in June.
The neighbouring gambling territory of Macau, a former Portuguese colony that returned to Chinese rule in 1999, elected former legislature head Ho Iat Seng as its leader on Sunday – the sole approved candidate.
Ho, who has deep ties to China, is expected to cement Beijing’s control over the “special administrative region”, the same status given to Hong Kong, and distance it from the unrest there.
US-UK trade deal within a year of Brexit will be tight, UK PM Johnson
It will be tight to meet the United States’ desire to do a post-Brexit trade deal with Britain within a year, British Prime Minister Boris Johnson said on Sunday.
Johnson, who took office last month, had his first bilateral meeting with U.S. President Donald Trump earlier on Sunday at the G7 meeting in France and the two discussed a range of issues including trade.
In interviews with British television media afterwards, Johnson said the United States wanted to do a deal within a year of Britain leaving the EU on Oct. 31.
“Years and years is an exaggeration, but to do it all within a year is going to be tight,” he told BBC TV.
Johnson also said the chances of Britain agreeing a Brexit deal with the EU were improving but it would be “touch and go”.
At G-7, Trump says he is not happy about North Korea missile tests
SAINT-JEAN-DE-LUZ, France — President Donald Trump said Sunday he was not happy after North Korea launched short-range ballistic missiles over the weekend.
“I’m not happy about it but again he’s not in violation of any agreement,” Trump said when asked about the recent string of tests from the North’s Kim Jong Un.
“I discussed long-range ballistic and that he cannot do and he hasn’t been doing it and he hasn’t been doing nuclear testing. He has done short-range, much more standard missiles, a lot of people are testing those missiles, not just him. We are in the world of missiles folks, whether you like it or not,” Trump said.
Meanwhile, Japanese Prime Minister Shinzo Abe said North Korea’s test was in violation of UN Security Council resolutions.
On Saturday, North Korea fired what appeared to be two short-range ballistic missiles into the sea off its east coast, the South Korean military said, the latest in a series of launches in recent weeks amid stalled denuclearization talks.
North Korea, the only nation to have tested nuclear weapons this century, spent most of Trump’s first year in office perfecting its nuclear arsenal. The newest member of the world’s exclusive nuclear weapons club has stopped testing of its nukes for now as the U.S. and international community offer the possibility of relief from crippling economic sanctions.
Under the third-generation North Korean leader, the reclusive state has conducted its most powerful nuclear test, launched its first-ever intercontinental ballistic missile and threatened to send missiles into the waters near the U.S. territory of Guam.
Since 2011, Kim has fired more than 90 missiles and had four nuclear weapons tests, which is more than what his father, Kim Jong Il, and grandfather, Kim Il Sung, launched over a period of 27 years.
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