Former Congressional Budget Office director Doug Holtz Eakin explains the impact tariffs can have on the Canadian economy and shares his thoughts on the President-elect’s plan and the House speaker’s vote.
On Tuesday President-elect Trump announced plans to create a new “External Revenue Service” tasked with collecting tax revenue, but economists are pushing back and noting that American traders are bearing the brunt of the tax costs instead of overseas firms.
“For too long, we have relied on taxing our great people through the Internal Revenue Service (IRS). Through weak and woefully weak trade agreements, the American economy has brought growth and prosperity to the world, while we tax ourselves. It’s time for that to change,” wrote Trump in a post on the Truth Social platform. .
“Today I announce that I will create an EXTERNAL REVENUE SERVICE to collect our prices, activities and all Income from external sources. We will start charging those who make money with us through Trade, and they will start paying, FINALLY. , their due share on January 20, 2025, it will be the birthday of the External Revenue Service.
Tariffs are import taxes, in most cases paid by the buyer from the US to an existing federal agency, US Customs and Border Protection (CBP). That shift has prompted a backlash from economists who say the proposed External Revenue Service name represents an attempt to hide who pays the bills.
TRUMP DENIES REPORT ON CHANGES TO TAX SYSTEMS
President-elect Trump has said he plans to create an “External Revenue Service” to collect tariffs paid by American exporters. (Photos by Bill Pugliano/Getty / Getty Images)
“The president-elect may try to market his high-tax agenda as a foreign tax, but the messaging doesn’t change that higher prices will be paid by people and businesses in the United States who import goods,” Erica York, vice president of Tax. Foundation, he told FOX Business.
“Taxes are not foreign revenue; they are taxes on US importers that reduce both the US economy and US income. Higher taxes will create a strain on the US economy and will threaten to reduce the benefits of tax cuts elsewhere. They should not be relied upon as a major source of tax revenue. ,” York explained.
TRUMP’S PROPOSED TARIFFS: WHICH CONSUMER PRODUCTS WOULD BE ILLEGAL?
President-elect Trump, seen here with Canadian Prime Minister Justin Trudeau who recently announced his resignation, has campaigned to impose tariffs on America’s trading partners. (Dan Kitwood/Getty Images) / Getty Images
Scott Lincicome, vice president of General Economics at the Cato Institute, expressed similar sentiments and told FOX Business: “The name of the agency is more symbolic than the main thing – and it misleads the name at that. In many cases, the groups in the United States – not the sources foreign (‘foreign’) – pay US prices and, as confirmed by several recent studies, they also face an economic crisis.”
“Declaring a ‘foreign’ tax credit would therefore be as misleading as, say, declaring a domestic sales tax ‘foreign’ because it happens to apply to foreign-made goods sold at your local Walmart. At the end of the day, Trump could call it ‘Foreigners Pay the Tariffs.’ Agency,’ and it’s not going to change the fact that the American people really are,” Lincicome said.
GOLDMAN SACHS: TRUMP TAX CUTS, TAX REDUCTIONS WILL PROMOTE GROWTH; FEES MAY BE A DRAG
Fees are paid by importers to US Customs and Border Protection at the point of entry in most cases. (Photographer: Luke Sharrett/Bloomberg via Getty Images/Getty Images)
In his successful campaign to return to the White House, Trump proposed plans to impose an across-the-board tariff of 10% or 20% – and a whopping 60% tariff on goods from China.
He also threatened to impose 25% tariffs on goods from Canada and Mexico, both of which are members of the US-Mexico-Canada Agreement (USMCA) – the free trade agreement that Trump negotiated during his first term as successor to the North American Free Trade Agreement. Trade Agreement (NAFTA).
His campaign platform included tax revenue as a source of tax revenue for proposed tax cuts and spending programs.
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Trump will be inaugurated for his second term as president on Monday, January 20. His transition team has indicated that he plans to sign a slate of executive orders when he takes office, as new presidents often do.
Trump’s social media posts suggest that the Foreign Tax Service will be created on Inauguration Day, although the details of whether that will be done through an executive order and how the new agency plans to operate are unclear at this time.
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