Uncategorized

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.

12th Annual Illinois Pension Report


View as PDF
Report Overview
Retired Government Employees Receiving $100,000+ Annually
Chicago – Taxpayer Education Foundation (TEF) today released its 12th annual report on the Illinois statewide government pension systems. Every year, TEF analyses pension data received through Freedom of Information Act (FOIA) requests for the 6 statewide pension funds. TEF calculates estimated lifetime payouts for each pensioner based on the state’s laws and IRS actuarial tables.
Based on the 2018 pension data and the annual reports of the specific pension funds, TEF has determined that at least 19,481 pensioners are receiving $100,000 or more in annual pension payments. That level of payout has increased about 15% over the 2017 pension payments. At this rate of increase, the number of pensions over $100,000 will far exceed 21,000 in 2019. Pensions over $50,000 a year are now at 107,092.
The total cost to taxpayers for the 6 statewide funds is $8.7 billion from the state general fund and an additional $933,937,321 from property taxes for the IMRF whose taxpayer deposits are entirely funded through property taxes. This does not include any of the Chicago government pensions or the hundreds of police and fire pension funds throughout the state. For perspective, for every dollar that the government employees have deposited to the statewide pension funds, taxpayers have been forced to deposit $4.50. Put another way, that is approximately $683 for every man, woman, and child in the state for these 6 pension fund payments only.
It would be intellectually dishonest not to consider how pension obligations stack up against all of the other demands on taxpayer money. Nearly 25% of all money collected from taxpayers goes to fund the pensions of former employees. This is money being paid for services rendered sometime in the past, in competition for the services needed today. As this burden for past services becomes greater and greater, thanks to a compounded cost of living adjustment for retirees, fewer taxpayer dollars will be available for education, healthcare, safety, and security.
This Pension Crisis is decimating Illinois. Harvey Illinois was forced to lay off 25% of police employees and 40% of firefighters to pay lavish pensions. Harvey is just the beginning, as many more municipalities are facing the same fate. The state legislature must now allow local governments to declare bankruptcy to save Illinois.  It is also imperative that new-hires be placed into a 401(k) style retirement savings account rather than into one of the defined benefit pension funds.
Click for SERS 2018 Pension Grid
Click for GARS 2018 Pension Grid
Click for IMRF 2018 Pension Grid
Click for JRS 2018 Pension Grid
Click for SURS 2018 Pension Grid
Click for TRS 2018 Pension Grid

Taxpayers Defeat Three Home Rule Referenda On March 20

View as PDF
CHICAGO—Illinois taxpayers won important victories in three local elections on March 20, said Jim Tobin, President of Taxpayers United of America (TUA).
“Taxpayers scored a huge victory in Rockford, Illinois’ third largest city,” said Tobin. “The greedy Rockford politicians tried to bring back unlimited Home Rule taxing powers, which our organization helped Rockford taxpayers repeal in 1983. We sent our Director of Outreach, Val W. Zimnicki, to Rockford, and he held a very-well-received news conference at the Rockford Public Library on March 14.”
“In addition, TUA used direct mail and other techniques to help Rockford taxpayers.”
“Rockford taxpayers beat back Home Rule by 54% to 46%.”
“The politicians running the Village of Merrionette Park, IL, used taxpayer dollars to urge its taxpayers to give them unlimited Home Rule taxing powers. We helped its taxpayers fight this power grab, and unlimited Home Rule taxing power for Merrionette Park was defeated by a 66% to 33% margin.”
“The Village of Homewood, Illinois, also beat back Home Rule by a decisive margin of 70% to 30%.”
“TUA has been helping local taxpayers since 1977, and we have had 426 victories against local tax increase referenda since then.”
“Home Rule is the most insidious form of local government in the U.S.,” said Tobin. “It eliminates the protection of property tax caps and allows local governments to raise taxes without limit, and to create new taxes with which to bludgeon taxpayers.”
“Home Rule is home ruin. It puts property owners and taxpayers totally at the mercy of local government bureaucrats. It can destroy the economy of a city and force taxpayers to move to municipalities that have no Home Rule and lower taxes.”
 

BLOG POSTS

DISCLAIMER

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.

ADDRESS

Chicago, IL 60606 205 W. Randolph Street, Suite 1305
Phone: (312) 427-5128
Fax: (312) 427-5139
Website: https://taxpayersunitedofamerica.org
Email: info@taxpayersunited.org

Donate