President Donald J. Trump’s tariff plan is working exactly as he intended.
The initially announced steep tariffs on more than 100 countries roiled markets – and sent the mainstream media into hysteria. Some of our trading partners bristled and rattled sabers with relatively small retaliatory plans.
It was all perfectly Trumpian. The President got everyone’s attention (which is almost always his first step). He then softened his stance to open negotiations. Our trading partners now realize how serious President Trump is, and they are coming to the table to figure out how they can continue to engage with the world’s largest market.
The next challenge for the White House and Republicans will be deciding what to do with the potential flood of tariff revenues.
President Trump’s robust tariff regime will likely yield a lot of revenue. This money should be returned to the American people. There must not be any discussion of keeping tariff revenue as a new pork barrel for politicians or bureaucrats.
The Founding Fathers understood the power of tariffs. Specifically, they saw potential for tariffs to replace domestic taxes. The clearest explanation of this was President Thomas Jefferson in his 1805 second inaugural address. Jefferson combined fiscal frugality with a shrewd tax policy to minimize the burden on the American people:
“The suppression of unnecessary offices, of useless establishments and expenses, enabled us to discontinue our internal taxes….
“These covering our land with officers, and opening our doors to their intrusions, had already begun that process of domiciliary vexation which, once entered, is scarcely to be restrained from reaching successively every article of produce and property.
“The remaining revenue on the consumption of foreign articles, is paid cheerfully by those who can afford to add foreign luxuries to domestic comforts, being collected on our seaboards and frontiers only, and incorporated with the transactions of our mercantile citizens, it may be the pleasure and pride of an American to ask, what farmer, what mechanic, what laborer, ever sees a tax-gatherer of the United States?”
Now, the world was much different in Jefferson’s time. For instance, there was no federal income tax. Jefferson’s vision of no one ever seeing a tax collector inside the United States is likely impossible. However, it reflects an ideal world of limited government and intrusion.
President Trump is methodically and aggressively creating a new worldwide system of bilateral agreements and tariff arrangements. The revenue stream will be virtually impossible to accurately project until after the year is over.
However, there are several ways to return the revenue to the American people.
One way would be to reduce the following year’s income tax rates based on total tariff revenue collected. If 2025 is a big year for revenue from places such as China and the European Union, then we could have significant income tax reductions for everyone in 2026.
A second option would be to create a system like the Alaskan Permanent Fund Dividend. Each year, it sends checks out to eligible Alaskans reflecting the wealth created by the state’s natural resources. In 2024, the fund sent $1,702 to each of the 600,000 eligible Alaskans. It would be useful to estimate a range of revenues the new tariffs system will generate and then consider how to return it to the American people. Since some estimates indicate the tariffs could raise $2 trillion to $3 trillion over the next decade, the amount involved could be substantial.
A third option would be to look at a series of tax credits based on national goals that could be expanded with tariff revenues. We could create a robust permanent research and development tax credit if 20 percent of the tariff revenue were dedicated to accelerating technology. A portion could also go toward tax credits aimed to promote small business investment, strong families, job creation, or other values.
A fourth option would be to partially follow Jefferson’s model and eliminate some specific, onerous taxes with tariff income. In some cases, the cost of tax preparation is higher than the actual tax payment. Eliminating them would increase private sector growth and make filing taxes less of a burden.
In any event, Congress should start thinking now about the most effective ways to put President Trump’s tariff revenues into Americans’ pockets – and far away from Washington’s piggy bank.
For more commentary from Newt Gingrich, visit Gingrich360.com. Also, subscribe to the Newt’s World podcast.
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