Article • Dean Baker’s Beat the Press
Donald Trump Declares April 2 “Tax Day”

Article • Dean Baker’s Beat the Press
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Donald Trump seems pretty clear that he will go through with his huge tax hikes (tariffs) on April 2. We don’t know for sure what his cute tax package will be, but if it’s anything like what he’s promised: 25 percent taxes on imports from Mexico and Canada, 20 percent taxes on imports from China, and 25 percent taxes on imported aluminum, steel, and copper, and possibly perhaps some surprise taxes on imports from the European Union and Japan, we are talking $200 billion to $400 billion a year.
That sum would be between $1,500 and $3,000 per household. If we take these amounts over a decade, as is often done in tax discussions, we’re talking about between $1.5 trillion and $3.0 trillion in higher taxes that Donald Trump wants to hit us with in two weeks.
Depending on what he exactly we get from our reality TV show star president, this is likely to be the biggest tax increase in history. And unlike tax hikes put in place in the last three decades by Presidents Clinton and Obama, which primarily hit the top one percent, Trump’s tax hikes will primarily hit ordinary workers.
The reason is simple enough for even Donald Trump to understand. Import taxes are a tax on consumption and especially consumption of goods.
Trump and his billionaire friends don’t spend all their income. By contrast, a normal worker earning $60,000 a year likely spends pretty much their entire income. Furthermore, moderate and middle-income workers are likely to devote a larger share of their spending to buying things as opposed to services. They are more likely to spend money on items like food and clothes. By contrast higher income people spend more money on services like restaurants, gym memberships, and vacations.
This means that April 2, which Trump is apparently now hyping as “Liberation Day,” will probably be the biggest tax hit ordinary working people have ever seen. The Republican Party has now come full circle from being staunchly anti-tax to being a party celebrating big tax hikes.
Trump does throw out some mush-brained rationale about how his taxes will rebuild the United States industrial base. But no one who is not on his payroll tax takes his claims at all seriously. Our industry is now thoroughly integrated with our trading partners, especially neighboring Canada and Mexico. Trump’s taxes are more likely to just raise costs and hurt industry rather than help it. Trump can already claim 600 workers laid off in Minnesota mines.
And none of the arithmetic comes close to adding up. Even if we managed to close our trade deficit, which is currently 3.0 percent of GDP, entirely with increased manufacturing output, it would increase the share of the workforce employed in manufacturing from 8.0 percent to 9.0 percent. That is not exactly going to transform the labor market.
But it gets worse. Back in 1980, manufacturing jobs were good jobs. On average they paid higher wages and were more likely to offer health care insurance than other jobs in the private sector. This is no longer the case. The manufacturing wage premium has largely, if not completely, disappeared.
The reason is that the sector is no longer heavily unionized. In 1980 almost a third of manufacturing jobs were unionized compared to just 15 percent in the rest of the private sector. At present, only 8.0 percent of manufacturing jobs are unionized, which is barely better than the 6.0 percent figure for the rest of the private sector.
And the prospect that any new manufacturing jobs will be unionized is not very high. Co-president Elon Musk is extremely anti-union. He is even pushing a lawsuit arguing that the National Labor Relations Board, the agency that enforces labor law, is unconstitutional.
So, in Trump’s dreams, we increase the share of the workforce employed in manufacturing by 1.0 percentage point, and those jobs pay no more than the jobs in health care or retail that they replace. And this gain comes at the expense of trillions of dollars in higher taxes paid by ordinary working people.
That story might be a MAGA dream, but to any normal person it’s a nightmare. Happy Tax Day!