Trump floats more tariffs and eliminating taxes on tips. Here’s the price tag.

Simone Del Rosario:

Economists are crunching the numbers on some of Donald Trump’s campaign promises. Like this one:

Donald Trump:

“When I get to office, we are going to not charge taxes on tips, people making tips.”

Simone Del Rosario:

Which the bipartisan Committee for a Responsible Federal Budget says could add anywhere from $125 billion to $500 billion to the U.S. deficit over a decade.

Or this one on tariffs:

Donald Trump:

“When companies come in and they dump their products in the United States, they should pay automatically, let’s say a 10% tax.”

Simone Del Rosario:

Which Trump’s campaign says will raise billions in revenue to pay for tax cuts. But independent think tanks recently tallied up the cost to middle-income families at $1,500 to $1,700 a year.

Poll after poll shows the economy and inflation are top issues for voters just 5 months before Election Day.

I want to dig into the meat of some of these proposals with David M. Walker, former U.S. comptroller general under Presidents Clinton and W. Bush.

David M. Walker:

Let’s start with the tips. Okay, one of the things that I would say on any proposal, especially one that comes from the campaign trail, whether they be a Democrat or Republican, and no matter who the person is, show me the numbers. I haven’t seen any numbers on this, but just common sense would tell you that if you’re going to exempt a certain form of income that is not at the present point in time, exempt, that means you’re going to get less revenue. I don’t see how this revenue loss would be offset by additional economic activity. So therefore this quote, unquote, tax cut would not pay for itself. It also would have an adverse impact on Social Security and Medicare, because you end up getting taxed on wages and on, you know, certain other forms of income, you know, through that. So this would exempt that, presumably, you know, candidly, I think that what we ought to be doing with regard to waiters and waitresses and those who rely primarily on tips for their income is we ought to be going to the European model. We ought to pay them enough money such that they don’t have to rely upon tips in order to be able to have a decent standard of living. The other thing is, there have been estimates that up to 45% of all tip income does not get reported at the present point in time, so we don’t get revenues on that. But that doesn’t mean you ought to get rid of the other 55% that is reported.

Simone Del Rosario
want to see numbers that this is obviously something that would be advantageous, not something that would add to the deficit. That’s

David M Walker
correct. I mean, we’re already deeply in the hole. We need to figure out how we’re going to climb out of the hole, not to dig it deeper.

Simone Del Rosario
Let’s move on to tariffs. I want to really dig into this with you, because there’s a huge disconnect in how tariffs would impact American families. We’ve got some estimates from a couple of different think tanks that are saying that a 10% increase on all tariffs, which is something that President Trump has floated. We’ll get into the other proposals later, but this 10% across the board tariff on imports would end up costing the average middle income family somewhere between $1500 to $1700 per household per year. The Trump campaign is saying this idea that tariffs or attacks on American families is a lie, and in fact, they said it’s pushed by the Chinese Communist Party. What do you say about this narrative that raising tariffs on imports is going to cost Americans?

David M Walker
Well, first, I think it’s important to understand that until we had an income tax, the primary means in which the federal government obtained revenue was through tariffs, and then we went to the income tax. It. Is technically not a tax, but if you are going to tariff goods, it is going to affect the price of those goods, and so ultimately, the consumer is going to end up paying more as a result of those tariffs. The real question is, in exchange for what is this going to be? In exchange for a tax cut someplace else. So when you look at it from an economic standpoint, it will have an effect on prices. It’s not a tax, but it will have an effect on prices. Trump has floated replacing all of income tax with tariffs, something you say that this country has done in its history. Is that feasible?

David M Walker
Is it theoretically feasible? Yes. Is it politically feasible? No.

Simone Del Rosario
What makes it theoretically feasible, given the way that it’s structured right now, and how long would that take, because the government is heavily reliant on income tax?

David M Walker
Well, it is. But you know, as I said before, the world has changed a lot. Before 1912 you know, which is when we adopted a number of, you know, constitutional amendments, including the income tax. All right, before that, the federal government was funded primarily through tariffs. You know, we’re a lot different now than we were back then. Mathematically, can you do it? Yes, mathematically, you could do it, but it would be very complicated. It would have to be phased in. And frankly, I think from a political standpoint, you would never see it get passed.

Simone Del Rosario:
Walk me through the idea of tariffs in the way that you envision, former President Trump and his people are seeing this play out. What is what’s the end game with tariffs? What is the goal here?

David M Walker 9:53
Well, I think the thing that former President Trump is probably most concerned about is the. Fact that you know it’s one thing to be for free trade, but you also need to have fair trade, and to the extent that certain certain countries are engaging in practices that are fundamentally inconsistent with free trade, then one way that you can deal with that is through imposing tariffs in order to try to change the economics, which includes things like why people end up offshoring things to countries like China, because you can produce it a lot cheaper. They don’t have good labor laws, they don’t have good human rights, they don’t have good environmental laws, all right, and so they create a cost differential that ends up, you know, making their goods a lot more competitive at the same point in time, hurts employment in the United States. So I think his primary concern is, you don’t have a level playing field that is hurting the United States and people who want to be employed in the United States. That’s his primary thing, to the extent that he’s talking about going back to the future, namely, let’s just get rid of the income tax, and let’s just raise all federal government revenues through tariffs. That would be something that would be very dramatic. You’d really have to analyze it thoroughly. I don’t think it’s politically feasible, though, at this point in time, because you got to keep in mind, you got to get a majority of the House, 60 votes in the Senate, and the signature of the president.

Simone Del Rosario 11:31
But the end game beyond fair trade, as you said, the end game would be moving a lot of manufacturing back to the United States, correct? There’s no

David M Walker 11:42
question. It’s not just a matter of fair trade. It’s a matter of trying to onshore, bring back to the United States a lot of capacity. The truth is, we have become too dependent on others for certain critical materials, and whether that be rare earth materials, whether that be materials needed for pharmaceuticals, whether that be for high end semiconductors from Taiwan. You know, it’s not just an economic security issue, it’s a national security issue.

Simone Del Rosario:
let me just end with this. Do you think anybody running for the oval right now is particularly concerned about the deficit based on the proposals they’re putting forward?

David M Walker 14:29
There’s not enough concern about the deficit. There’s not a party of fiscal responsibility. The last fiscally responsible president we had was Bill Clinton. The biggest deficit this country has right now as a leadership deficit. We desperately need our next president, whomever that may be, to rise to the occasion, to use the bully pulpit and to have a clarion call for the need to right size government put our finances in order. Because if we fail to do that, the. It will be a major threat to our future, economic security, national security, international standing and domestic tranquility. And that has been echoed not just by me, but former chairmans of the Joint Chiefs of Staff, CEOs from sort of the largest companies in the world, as well as the International Monetary Fund, as well as various rating agencies. We’re late in the ball game. It’s time to do something.