This is one of the most common talking points right now in my space. The political & fully legal gymnastics that the Importer of Record does to pass on the tariff cost is dumbfounding. Leads me to an additional question.
As an economist was are your views on a consumption tax?
I would love to hear more about the applications of what is happening on the ground. As far as consumption tax, depends on which views you want to hear about. Simply put, consumption tax is regressive. It is a higher proportion of low-income earners' spending. Can or should it replace income tax? It is a question about the equity of contribution to public spending.
Great post as ever! Thank you! I do explain intricacies of price elasticity of demand for products with respect to taxes (and a tariff is a sales tax) to my students, but usually less so in more general-audience forums. The other point I like to make is that usually, in a high-labor-cost country like the US, we import goods from other countries because doing so reduces the price. This is especially important to lower-income earners. In other words, a broad tariff such as the one the current US administration is introducing is a tax which mostly has a higher negative effect on the purchasing power of lower-income consumers. Moreover, because the goods are being sold as lower cost items, the profit producers receive on those goods is thinner than for luxury goods, and so the ability of sellers to "eat" the higher cost is lower.
The margins argument is not being presented enough. Walmart's margins are thin, they make their profits on volume. They cannot "eat" any more of their margins.
This is one of the most common talking points right now in my space. The political & fully legal gymnastics that the Importer of Record does to pass on the tariff cost is dumbfounding. Leads me to an additional question.
As an economist was are your views on a consumption tax?
I would love to hear more about the applications of what is happening on the ground. As far as consumption tax, depends on which views you want to hear about. Simply put, consumption tax is regressive. It is a higher proportion of low-income earners' spending. Can or should it replace income tax? It is a question about the equity of contribution to public spending.
It is interesting to see someone that has been a antin interventionist now doing the opposite
Great post as ever! Thank you! I do explain intricacies of price elasticity of demand for products with respect to taxes (and a tariff is a sales tax) to my students, but usually less so in more general-audience forums. The other point I like to make is that usually, in a high-labor-cost country like the US, we import goods from other countries because doing so reduces the price. This is especially important to lower-income earners. In other words, a broad tariff such as the one the current US administration is introducing is a tax which mostly has a higher negative effect on the purchasing power of lower-income consumers. Moreover, because the goods are being sold as lower cost items, the profit producers receive on those goods is thinner than for luxury goods, and so the ability of sellers to "eat" the higher cost is lower.
The margins argument is not being presented enough. Walmart's margins are thin, they make their profits on volume. They cannot "eat" any more of their margins.