Illinois

From the Tax Foundation: Automobile Tariffs Would Offset Half the TCJA Gains for Low-income Households

A warning to taxpayers from the Tax Foundation. Tariffs are just another unjust tax on taxpayers.
By:  Erica York
Source: Tax Foundation 
The Trump administration is reportedly considering new tariffs of as much as 25 percent on automobile imports, potentially including cars, trucks, and automotive parts. On May 23, U.S. Secretary of Commerce Wilbur Ross began a national security investigation under Section 232 of U.S. trade law into the import of automobiles and automotive tariffs. We estimate that increasing tariffs on automobile imports would reduce the gain in after-tax income for households in 2018 derived from the Tax Cuts and Jobs Act while making the tax code less progressive.
In 2017, the United States imported nearly $293 billion worth of vehicles for consumption, while paying about $3.4 billion in duties on those imports. If we assume that import levels will remain the same and that the proposed tariff would apply to all goods in the Harmonized Tariff Schedule under the vehicle chapter (Chapter 87), in addition to the tariffs that are already levied, the new tariff would amount to a $73 billion tax increase. It is likely that some vehicles or parts in Chapter 87 could be excluded from the tariff, while parts that may be listed in other chapters could be included, so the exact amount of the tax increase could be different.
Using the assumptions mentioned above, we estimate that the new tariffs on automobiles would reduce after-tax incomes for all taxpayers by 0.47 percent in 2018 while making the distribution of the tax burden less progressive. These tariffs would fall harder on those taxpayers in the bottom 80 percent, reducing their after-tax income by 0.49 percent, and by 0.45 percent for the top 20 percent. The top 1 percent of taxpayers would see the smallest reduction in after-tax income, at 0.39 percent.

Source: Tax Foundation Taxes and Growth Model, June 2018, and Tax Foundation calculations
Table 1. Distributional Impact of the Tax Cuts and Jobs Act and Proposed Automobile Tariffs
Percentage Change in After-Tax Income, 2018
Income Group TCJA Tariffs Net Change in Impact
0% to 20% 1.00% -0.49% 0.51% -49%
20% to 40% 1.70% -0.49% 1.21% -29%
40% to 60% 1.70% -0.49% 1.21% -29%
60% to 80% 1.70% -0.49% 1.21% -29%
80% to 100% 3.90% -0.45% 3.45% -12%
80% to 90% 1.90% -0.47% 1.43% -25%
90% to 95% 2.10% -0.49% 1.61% -23%
95% to 99% 3.80% -0.47% 3.33% -12%
99% to 100% 7.00% -0.39% 6.61% -6%
TOTAL 2.90% -0.47% 2.43% -16%

Table 1 compares the 2018 distributional impact of the automobile tariffs to the 2018 distributional impact of the Tax Cuts and Jobs Act, and shows that these tariffs would reduce the increase in after-tax income anticipated by households, especially lower- and middle-income households.
We estimate, for example, that households in the 20 to 40 percent income group would see a 1.7 percent increase in after-tax income in 2018 because of the Tax Cuts and Jobs Act. However, automobile tariffs would have an offsetting effect, reducing after-tax income by 0.49 percent for these households. This means that automobile tariffs would decrease the expected increase in after-tax income for households in this group by 29 percent.
The tariffs would fall hardest on households in the 0 to 20 percent income group, reducing their expected increase in after-tax income by 49 percent—if the average increase in income for this group were $100, they would receive just $51 if the tariffs took effect as assumed. For comparison, the tariffs would reduce the estimated increase in after-tax income for households in the top 1 percent by about 6 percent.
Economists generally agree that free trade increases the level of economic output and income, and conversely, that trade barriers like tariffs reduce economic output and income. While it may be quite some time until the conclusion of the automobile import investigation, we should expect the effects of any resulting tariffs would be to reduce economic output and incomes. If imposed, these automobile tariffs would fall more on middle- and lower-income taxpayers, reducing the increase in income these households would see because of the Tax Cuts and Jobs Act, and making the distribution of the tax burden less progressive.

Modeling Notes

The Tax Foundation models the impact of tariffs with the Taxes and Growth model. In the Tax Foundation’s model, tariffs are treated as a targeted excise tax on the tradeable sector, which ultimately fall on U.S. labor or capital and result in lower output. To model the distributional impact, we pass the tax backwards as reductions in factor income, which reduces the returns to both labor and capital income. In modeling tariffs, we do not account for the potential reaction of foreign countries, nor the additional losses in welfare from having taxes with uneven impacts across sectors. To calculate the amount of the tax increase, we applied a 25 percent tariff rate to all goods covered by Chapter 87 of the Harmonized Tariff Schedule using 2017 import levels.

DEMOCRAT ESTABLISHMENT CHALLENGES SIGNATURES OF INDEPENDENT GUBERNATORIAL TICKET DOCK WALLS AND JIM TOBIN


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CHICAGO—The Democrat party establishment has challenged the petition signatures turned in by the independent ticket of entrepreneur William “Dock” Walls and economist and taxpayer advocate, James L. “Jim” Tobin.
“The left-wing, billionaire Democrat candidate, J.B. Pritzker, is behind the challenge,” said Jim Tobin, candidate for Lt. Governor, and president of Taxpayers United of America.
“Pritzker, a tool of Chicago machine boss and Ill. House Speaker, Michael J. Madigan, wants to raise state taxes again in order to pump more taxpayer dollars into the dying state pension funds for retired government employees. The dollars from the last, huge state income tax increase were pumped into the failing state pension funds. It barely moved the needle.”
“Based on 2018 pension data and the annual reports of the specific pension funds, at least 19,481 pensioners are receiving $100,000 or more in annual pension payments. No wonder the pension funds are foundering, and no wonder Springfield Democrats want to raise state taxes again.”
“Pritzker supports placing the Income Tax Increase Amendment on the statewide ballot, which current and retired state-government employees will vote for overwhelmingly. This would change the state income tax from a flat income tax to a graduated income tax.”
“If the amendment passes, House Bill 3522, filed by state Rep. Robert Martwick, D-Chicago, would tax incomes under $7,500 at 4 percent. For incomes between $7,500 and $15,000, the rate would be 5.84 percent. For incomes between $15,000 and $225,000, the rate would be 6.27 percent. And for incomes over $225,000, the rate would be 7.65 percent. In addition, the committee for budget and tax increases (Center for Tax and Budget Accountability) supports a maximum income tax rate of 9.85 percent.”
“Dock Walls and I will fight these challenges. This is not a game. It is a game-changer. We intend to appear on the statewide ballot in November. It’s no longer business-as-usual. It’s time Illinois taxpayers had candidates who look out for them, and who are not owned by government-employee unions.”

CHICAGO TRIBUNE CAN’T FIGURE OUT WHY CHICAGO AND ILLINOIS HAVE LOST POPULATION – BUT WE CAN

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CHICAGO—A recent Chicago Tribune article called attention to Chicago’s having lost 3,825 residents last year and 4,879 residents in 2016, and to the fact that Chicago metropolitan area lost residents for three consecutive years.
Illinois dropped from fifth-most populous state to sixth-most populous state in 2017.
The article, Chicago population still tops Houston’s, described the population losses as a “trickle,” and added that “experts are trying to figure out why,” noted Jim Tobin, president of Taxpayers United of America, headquartered in Chicago.
“I can tell you why, and so can everyone other than the Tribune. Two reasons: the city’s and state’s high taxes, forcing taxpayers to flee to states with lower taxes, and the realization that the City of Chicago and State of Illinois are bankrupt and that both will go under in the not-too-distant future.”
“The lavish, gold-plated pensions of retired Chicago and state government-employees are rapidly drying-up their pension funds. Here are some facts regarding the Tribune’s host city.”
“All of the top 200 Chicago pensions for its ‘civil servants’ are at least $100,000 a year,” said Tobin. “The average retirement age for this group of pensioners is only 58. Social Security requires taxpayers to reach age 67 to be eligible for full retirement benefits, which average only about $17,000 a year.”
“I would like to inform the Tribune that the Municipal Employees’ Annuity and Benefit Fund of Chicago, (MEABF) is predicted to be insolvent in 8 years, according to its most recent audit. The auditing firm estimated that taxpayers would have to deposit $1,005,456,621 to make the fund solvent. MEABF does not include Chicago teachers, police, or firefighters who each have their own pension system, all separate from the 6 statewide pension funds.”
“The state of Illinois also is bankrupt. It can’t pay its bills because the outrageously rich government pensions have robbed  the taxpayers blind. And there won’t be a bailout by the state for the city of Chicago – there just isn’t enough taxpayer money, no matter how high taxes are raised.”
“We support the plan by independent gubernatorial candidate William “Dock” Walls to repeal the back-breaking Illinois state income tax.”
 

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Taxpayers United Of America: (TUA). is a nonpartisan, 501(c)(4) taxpayer advocacy group. Founded June 27, 1976 in Chicago, Illinois by activist and economist Jim Tobin, TUA works on behalf of taxpayers to reduce local, state, and federal taxes. In the past forty years, TUA has saved taxpayers more than $200 billion n taxes and has become one of the largest taxpayer organizations in America. Check All posts. s.

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