The money made from a tariff goes to the government. Trump said himself this is to “raise more money to fund the government”. So if we do not want to call it a tax, we can call it “additional federal revenue“.
Of course this is paid by the importer. The final total cost is – (product + shipping + tariff). That is the starting cost per item.
When we buy something in Florida and we pay the 6% extra, that is the total cost of the product. The extra money does go to fund the state of Florida. (that is how we fund Florida in fact).
When we buy coffee and it cost 25% more (plus profit), the 25% extra went to fund the federal government.
In both cases:
- There is an added cost, based on consumption
- The added cost is imposed by and goes to the government
So who ends up paying for this “additional federal revenue“?
Let us say we bring in 500 billion in tariff revenue, which is paid at the consumer level. What percentage of that total money do you think the top 1% paid in tariffed goods? Not much.
Summary
Due to being a consumption tax:
- The super rich will have an effective tax rate that is almost zero
- The poorest will have the highest effective tax rate
Case Study
Due to Florida using almost solely a consumption tax to pay for the state:
- The top 1% pay under 3% of their income to pay for the state budget
- The middle 60% pay 9% of their income to pay for the state budget
- The bottom 20% pay 13% of their income to pay for the state budget
* This is after paying all federal taxes. The poorest people have to fit the bill for the state by using 13% of their entire bring home paycheck, after taxes, to pay the Florida budget.
Salt in the wounds: Food is exempt from sales tax in Florida, but the poor are not exempt from the 25% hike in some goods. So the disparity you see above, that has been tempered by the food exception, is going to affect the poorest even more than those numbers show.
Is that fair?