The Corner

Economy & Business

Senator Cotton’s Tariff Rebate Idea

The senator from Arkansas proposes that tariff revenue be rebated to taxpayers in the bottom three brackets (singles making up to $84,000 and married couples making up to $168,000 in taxable income). In a press release, Senator Cotton said, “Tariffs are an effective way to apply pressure to China and other nations in trade negotiations, but there’s no reason that tariff revenue can’t help working Americans in the process.”

The best argument I can see for this idea is that tariffs are sometimes necessary but, even when necessary, impose some pain on American consumers that the federal government can and should relieve. The progressivity of the rebate is partly justified by the regressivity of the tariff-induced price increases.

That justification is at odds, though, with the argument sometimes made by the administration and its defenders: that foreigners pay the tariffs and the costs aren’t passed on to consumers.

The rebates cannot undo the overall economic harm inflicted by tariffs. So, for example, steel tariffs will still undermine companies that use steel relative to all other companies, and may have to lay off (or refrain from hiring) workers.

That’s not an argument against the rebates. But the rebates might increase the total amount of harm by lowering the political costs of levying additional tariffs. That’s a particular problem if you believe that Cotton was too optimistic in that press release. Tariffs can be an effective way to yield economic gains, but in general they have not been.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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