Tariffs as a Major Revenue Source: Implications for Distribution and Growth | CEA | The White House

In the early days of our nation, tariffs, or taxes on imported goods, were a primary source of government revenue. Over time, however, as the nation’s economy and businesses matured, it became clear that it was both fairer for American households and better for businesses, many of whom increasingly imported inputs to aid their domestic production, to raise revenues through a progressive income tax rather than regressive tariffs. Tariffs remain an important and targeted tool, of course, to protect against unfair trade practices. But, as we show in this issue brief, to use them as a revenue source that would significantly or even wholly replace the income tax would increase inflation and invite deep economic distortions that benefit the wealthy and harm low- and middle-income Americans. Tariffs have not provided a meaningful share of revenue for the US government since the early 1900s (see Figure 1a). Existing imports duties on goods raised $80 billion last year, about 2 percent of the $

In the early days of our nation, tariffs, or taxes on imported goods, were a primary source of government revenue. Over time, however, as the nation’s economy and businesses matured, it became clear that it was both fairer for American households and better for businesses, many of whom increasingly imported inputs to aid their domestic production, to raise revenues through a progressive income tax rather than regressive tariffs. Tariffs remain an important and targeted tool, of course, to protect against unfair trade practices. But, as we show in this issue brief, to use them as a revenue sour