We are now well into the second month of a two year period of time in which Republicans are guaranteed control both Houses of Congress and the White House and yet no new major legislation has been passed. This is a scandalous waste of a precious and rare moment in American politics and the Republican Party needs to get its act together really fast!
There is no such thing as a good tax, but this is the best possible tax for Congress and President Trump to adopt at the present time. It would raise 1 trillion dollars over 10 years, which would go a long way in paying for the Trump spending agenda.
The argument against any given tax is that it discourages the activity that is taxed. Thus, taxing income discourages people from working, taxing savings discourages people from saving, and taxing consumption discourages people from buying things, which other people have made.
The argument against the 20 percent import tariff is that it will discourage free trade and that the costs of such a tax will be passed on to consumers in the form of higher prices. This argument is true. The Ryan tariff will discourage the activity taxed just as any other tax would do.
But the argument in favor of the Ryan tariff is that it will allow us to cut income taxes, which discourage people from working. It is smart to discourage a little bit of the buying of foreign goods if you can then cut income taxes and get people back into the workplace or get them to work harder.
Ideally, we should have a mixed portfolio of taxes so we do not discourage any one activity too much. Right now our business and income taxes are too high and our tariffs are too low. The Ryan-Bannon plan corrects this imbalance. It is a modest tariff, and a modest tariff, along with modest income taxes, and modest sales taxes should all equally be a part of our national taxation portfolio.
The Ryan-Bannon plan will encourage Americans to buy American products, and it will thus promote good jobs here in the United States. I would be strongly opposed to a tariff of more than 20 percent, but no tariff at all makes no sense because our competitors have such tariffs and because, by adding a modest tariff, we can afford some business and income tax relief.
If the federal government were to tax nothing but business, income, and savings, then we would discourage investment, work, and savings. The more sensible route is to have a diversified portfolio of the things we tax. This is how we can afford to increase military spending, build the wall on the Mexican border, and cut business and income taxes, which are all things that we desperately need to do — now!
Steven G. Calabresi is the Clayton J. and Henry R. Barber Professor of Law at Northwestern University. Mr. Calabresi served as a Law Clerk to Justice Antonin Scalia of the United States Supreme Court, and he also clerked for U.S. Court of Appeals Judges Robert H. Bork and Ralph K. Winter.
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