Here's a better one:
Copied from a conservative sub
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This is a one dimensional false equivalency. Yes, both corporate taxes and tariffs raise prices on consumers. Though let's look at how they differ so we are better able to talk with our neighbors about it. Equating their economic impacts oversimplifies complex fiscal mechanisms.
**Corporate Tax Burden**:
- 31-38% falls on consumers through gradual price increases
- 38-42% absorbed by workers via reduced wages
- 20-31% borne by shareholders through lower returns
**Tariff Burden**:
- 90-100% passed directly to consumers through immediate price spikes
- Minimal absorption by foreign producers or domestic companies
**Corporate Taxes**: Progressive impact - shareholders (typically wealthier individuals) bear ~31% of burden
**Tariffs**: Regressive impact - low-income households spend ~56% more on tariff-affected essentials like clothing and food
**Revenue vs Cost Ratios**:
- $1 corporate tax increase generates $0.90 public revenue with $0.24 consumer cost
- $1 tariff revenue costs consumers $2.10+ through:
- Direct price hikes
- Reduced product variety
- Supply chain disruptions
**Additional characteristics**:
**Time Lag**: Corporate tax effects manifest over years through gradual market adjustments, while tariff impacts hit within months
**Wealth Distribution**: Corporate taxes partially target capital owners (top ~10% hold ~89% of stocks), while tariffs tax consumption patterns of all income groups, though with a disproportionate impact on lower income households due consumer goods being a larger share of living expenses
**Economic Multipliers**: Tariffs reduce GDP growth 2.5× more per-dollar collected than corporate taxes due to trade distortions
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##Why tariffs struggle to encourage domestic products:
While tariffs are often proposed as a mechanism to boost domestic production, evidence shows they fail to achieve this goal effectively due to three fundamental flaws
**Cost Inflation Across Supply Chains**:
Tariffs increase prices, particularly when applied to intermediate goods like steel or semiconductors. For example:
- **Washing machine tariffs** (20-50%) raised consumer prices by 12% ($86 average increase) while allowing domestic producers to inflate prices *without increasing output*
- **Downstream industries** (e.g., auto manufacturers using tariffed steel) face 15-25% higher production costs, reducing their global competitiveness
**Retaliatory Domino Effects**:
- **Trade partners retaliated** with $13.2B in counter-tariffs during Trump's first term, disproportionately hitting U.S. agriculture
- **Net job losses**: Steel tariffs created 1,000 steel jobs but eliminated 75,000 manufacturing jobs in steel-using industries
- **GDP contraction**: Every $1 in tariff revenue costs $2.10 in economic output through reduced trade flow
**Additional Case Evidence of Failed Protection**:
-**2009 Chinese tire tariffs**: Saved 1,200 jobs at $900,000 each while costing 3,731 retail jobs through higher consumer prices
- **Semiconductor tariffs**: Reduced domestic chipmakers' market value by 5.7% through supply chain disruptions
Tariffs ultimately create negative-sum outcomes where short-term industry protection comes at disproportionate long-term costs to economic efficiency, consumer welfare, and cross-sector competitiveness. Alternative approaches like targeted subsidies (CHIPS Act) or workforce development programs demonstrate higher efficacy in reshoring production without triggering inflationary spirals or trade wars.
The false equivalence between corporate taxes and tariffs primarily benefits wealthier shareholders seeking to avoid corporate tax liabilities, while shifting economic pain onto general consumers through less transparent protectionist measures.
Only the ultra-wealthy benefit from a trade war.
This post was edited by Fgs on Feb 2 2025 07:52pm