Phil Gramm and Mike Solon decry “the Trump tax increase of 2026.” A slice:
Republicans are counting on voters being pleasantly surprised by larger-than-expected tax refunds this spring thanks to new tax cuts from the One Big Beautiful Bill Act. Republican lawmakers hope this will ameliorate what Democrats call the “affordability crisis” and make it possible for the GOP to maintain control of Congress. The problem is that although the government is putting money back into taxpayers’ pockets on the one hand via tax refunds, it is taking more money out via tariff-driven price increases, leaving Americans worse off financially.
The Trump administration insists that other countries are eating the cost of tariffs. That is a myth. If foreigners were absorbing the costs, import prices would drop: To keep their products at the same prices in U.S. stores, foreigners would have to lower their products’ prices to make room for the tariff. Instead, a Bureau of Labor Statistics analysis found that “U.S. import prices were unchanged (0.0 percent) in 2025.” It’s hardly surprising, therefore, that a Federal Reserve Bank of New York analysis finds that “there is 100 percent pass-through from tariffs to import prices, and therefore on U.S. consumers and firms.”
The Joint Committee on Taxation estimates that taxpayers will receive about a $188 billion reduction in federal tax liability for 2025 that they wouldn’t have received if the president’s tax cuts hadn’t become law. Those refunds and tax benefits, however, have been more than offset by the $195 billion in new tariffs collected in 2025.
Things will get worse in 2026. The Congressional Budget Office projects that Mr. Trump’s tariffs will generate $331 billion this year, while the CBO estimates the new tax cuts will save taxpayers $230 billion. Families and businesses will be worse off on net. This will matter in the election. By October, Mr. Trump’s new tariffs from his second term will have cost American consumers and businesses $443 billion, while the tax cuts will have provided them with $379 billion. If the president successfully restores his tariffs to the levels where they were before the Supreme Court’s decision in February, the tariff tax in 2026 will be 44% larger than the new tax cuts contained in the Big Beautiful Bill.
John Puri explains “how inflation and tariffs impoverish people differently.” Two slices:
A current refrain in financial commentary is that tariffs — taxes on imported goods, paid by Americans — increase inflation. This is not technically accurate. Tariffs certainly raise the cost of items on which they are imposed. That is their design: Protectionists favor tariffs because they make foreign goods more expensive, driving people to buy domestic alternatives that are costlier to produce.
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Tariffs do not merely redistribute purchasing power, making one set of consumers better off at the expense of others. They destroy everyone’s purchasing power by limiting how it can be employed.
Iain Murray deserves credit for writing so intelligently about credit.
David Henderson makes clear that “central planning messes up spontaneous order.”
