With the new administration coming, I thought it would be good to kick off a discussion of the best way to fund the federal government. Tariffs vs free market. In general, I think a small flat sales tax to fund a small central government would be the most fair, but am curious about other’s thoughts.
Most European states, and my own country, rely on a value-added-tax system. Easy to administer, not too easy to avoid, and effective. Preferred to income tax, and certainly tariffs.
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A sales tax applies to lots of transactions. Hard to administer. To fund everything, the rate would have to be very high. Income is easier to track. The employer sets it up, automatically withholds, and you fund the government. Sort of.
The tariff dilemma is: if they work and you stimulate more domestic production, then you will have less revenue. If you collect more revenue, the production and the outsourcing are staying the same, but consumers like us are paying a little more.
I’m open to the idea that tariffs can accomplish some good, but there are tradeoffs, like certain goods being more expensive. I don’t like the idea of vital industries being completely out of the United States. It’s a subject I can’t begin to fathom.
If people are upset about prices being too high, and tariffs cause prices to go still higher, President Trump could get hit with a political backlash from tariffs.