Treasury Secretary Janet Yellen on Sunday blasted former President Donald Trump's idea of replacing income taxes with tariffs on imported goods — saying it would "make life unaffordable" for most Americans by dramatically raising prices.
During an appearance on ABC's "This Week with George Stephanopoulos," Yellen was asked by guest host Jonathan Karl whether the plan Trump reportedly floated to Republican lawmakers on Thursday was "remotely feasible."
"It would require tariffs well over 100%" to make up for the loss in income tax revenue Yellen said. "The impact would be to make life unaffordable for working-class Americans, and would harm American businesses."
Trump told GOP lawmakers he was considering an "all-tariff policy" that would allow the U.S. to eliminate the federal income tax, CNBC reported Thursday, citing sources who took part in a private meeting at the Capitol Hill Club in Washington.
Trump's proposal would represent an extreme extension of his policies in favor of higher tariffs to protect U.S. businesses and lower income taxes on American workers, noted the Wall Street Journal, which said a GOP lawmaker confirmed Trump's remarks.
One day after the closed-door meeting, Trump publicly repeated his false claim that tariffs imposed by his administration "brought in hundreds of billions of dollars from China."
Trump has repeatedly characterized tariffs as a bill that China pays to the U.S. government. But it's American importers, largely U.S. companies like Target, not China, that pay the tariffs on imported goods that they then pass on to their American consumers via higher prices.
"We stood up to China like nothing — like nobody has ever done," Trump insisted to guests celebrating his 78th birthday at his Mar-a-Lago club in West Palm Beach, Florida.
A working paper published in 2020 by the National Bureau of Economic Research said data from 2018, during Trump's trade war with China, showed that "U.S. tariffs continue to be almost entirely borne by U.S. firms and consumers."
The following year, the nonpartisan Tax Foundation think tank said that "rather than hurting foreign exporters, the economic evidence shows it is American firms and consumers hardest hit by the Trump tariffs."
And the bipartisan U.S. International Trade Commission issued a report last year that said Trump's tariffs on Chinese steel had resulted in higher prices for "downstream" consumers and manufacturers.
The tariffs also function like a regressive sales tax, with billionaires paying the same increased price rate on goods created by tariffs as the lowest-income Americans.
