Stealth Tax? Tariffs Show Donald Trump Understands Economics Way Better than You Do | Opinion

Everybody hates taxes. But Americans really hate taxes. It's part of our national DNA. We fought an eight-year war just to keep from paying a tax.

When Americans complain about taxes, they're usually focused on the big three: income, property and sales. There are many more taxes than that, and it's a bit like whack-a-mole: when one goes down, another pops up. Often they are raised in ways that are deliberately non-transparent, what are called stealth taxes. Eliminating income tax deductions is often cited as stealth taxation. Fees are another type of stealth tax: things that used to be cheap or free, like toll roads or in-state tuition, suddenly cost more. Even inflation can be a stealth tax, as it nudges more taxpayers into higher brackets. But the stealthiest of all are tariffs. The New York Times has reported that the Federal Reserve says the tariffs proposed by President Donald Trump will cost the average household $831 this year. Stealth taxes mostly disadvantage the poor.

There's a reason taxes never go down. Because spending doesn't. According to the White House, government spending in 2016 was $3.85 trillion. In 2020, it will be $4.74 trillion, an increase of 23 percent over four years. And there's probably nothing to be done about it, because tackling the issue of spending would be political suicide. Three-fourths of the fiscal year 2019 budget is comprised of three items: Social Security, health care and military. Over half of health care is Medicare, which goes to seniors. None of those is politically touchable. For all the frothing at the mouth about Aid for Families with Dependent Children, welfare is a trifle, at 8 percent.

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U.S. President Donald Trump answers questions on the comments of special counsel Robert Mueller while departing the White House May 30, 2019, in Washington, DC. Win McNamee / Getty Images

There's no quicker way to rile up old people than to mess with pensions. Ask Greece. I once asked a senior official at the U.S. Department of Agriculture why the U.S. subsidized exports of wheat. He took me over to the window and asked, "What do you see out there, son?" I said, "Rooftops." He replied, "Well, I see 12 million farmers and they all vote." When politicians in Washington look out their windows, they see 41 million seniors in the U.S., and over 70 percent of them vote—the highest percentage of any demographic group, according to Pew.

Nor are we likely to cut military spending. According to the Stockholm International Peace Research Institute (SIPRI,) in 2018 U.S. military spending was $649 billion, 38 percent of the world total, and more than twice that of any other country. If U.S. spending was in line with that of the European Union, it would be roughly half of that. That reduction would be enough to give every college student an annual scholarship of around $16,000.

But it's not going to happen. In 2017, four U.S. soldiers were killed in Niger. Most Americans had no idea we had troops in Niger. The U.S. is now fighting seven "official" wars, including Niger, as well as dozens of unofficial ones. But there are no Vietnam era-like demonstrations in the streets, and even the most liberal Democrats are careful to tiptoe around military spending. The pendulum has swung, perhaps in response to the anti-militarism of the 1960's. Or it may be due to the glamorization of war by Hollywood and game makers, which is amplified by the billions the armed forces spend annually on advertising. Or it may be the economic aspect. The military is a massive jobs program. Or it may even just be math. There are only 20 million veterans in the U.S., but they have families and friends who vote. Whatever the reason, support for the military has become conflated with patriotism. No politician is going there.

So tariffs may not just be saber-rattling. They may be a stealth tax and one that's here to stay. If there is a consistent theme over the last four years, it's how President Donald Trump's opponents have underestimated him. On tariffs, they assume that he doesn't understand how trade works, the geopolitical risks involved with alienating our trade partners, or that tariffs are really a stealth tax on his base. Maybe it's time to start assuming he understands economics just fine.

Stealth Tax? Tariffs Show Donald Trump Understands Economics Way Better than You Do | Opinion | Opinion