An Economist's Take on Tariffs: They May Be Bad, but Income Taxes Are Worse

Walter Edward Block is an economist. He's not just any economist, either; he is a self-professed anarcho-capitalist, which term describes the free-est free traders that ever free traded. He holds the Harold E. Wirth Eminent Scholar Endowed Chair in Economics at the J. A. Butt School of Business at Loyola University/New Orleans, and he is a member of the Faculty Network of the Foundation for Economic Education. So, he has been around the economic block a few times.

He's not a fan of tariffs, as you might expect from an anarcho-capitalist after the manner of Ludwig von Mises. But as it happens, he's even less of a fan of the income tax and reckons that tariffs may be the lesser of two evils:

...when it comes to comparative advantage, all too many people are out to lunch insofar as the teachings of Economics 101 are concerned. They fear that other countries might be more efficient than we are; with free trade, they would produce everything, we, nothing, and we would all starve to death from massive unemployment.
To dispel this myth, let’s consider a thought experiment. A lawyer is as good a typist as his secretary. He can produce $1,000 per day by practicing his profession. But for every such day, he needs a certain amount of typing. He can produce $200 worth each day. In two days, he can thus earn $1200 on his own. If he hires a typist, he can earn $2,000 from lawyering in two days, but must pay his secretary $200 daily for a total of $400. If he trades with her, he will come out with $2,000-$400=$1,600, an appreciable gain for him.
So is there any economic case for tariffs, given the foregoing? Yes, paradoxically, there is—in a way, if the alternative is a tax that’s even worse.

And, yes, the income tax is one of the worst ways to fund government, and the United States is one of the worst countries when it comes to how we administer an income tax. Our tax code makes "War and Peace" look like a little kid's Dick and Jane book. Nobody seems to understand all of it; it's likely there has never been a human alive who would be capable of understanding all of it. It is massive and inefficient; it requires an army of government workers to manage and enforce, and a millions-strong industry has grown up around helping people figure it out.

In the face of that, tariffs may, as Mr. Block points out, be the better option:

What would the benefits be thereof? First of all, there are many intelligent, productive people who work for the IRS. There are some 90,000 of them. If dismissed by their employer, they would be freed up to produce goods and services desired by the populace. Ditto for the many accountants and tax lawyers who devote all or part of their time to helping their clients wrestle with complicated IRS regulations. Further, many of us fill out our own tax forms. This takes hours, days in some cases, time that could be better spent on leisure or productivity.
The benefit here is that it takes relatively little labor to run a tariff system. Hey, we already have tariffs in place. An increase in their level would hardly call for much more manpower, likely hardly any more at all.

There's a catch, though.

Alabama's Red Land Cotton Welcomes Trump's Tariffs; 'I Think We've Got Nothing to Lose by Trying Them'

The president can't just eliminate the income tax. Congress can't just pass a law eliminating the income tax. Oh, they could - for a while - but the 16th Amendment, passed specifically to allow for the income tax, is still in place; another president, another Congress, could just bring the income tax back. Then we would have both systems in place, making things an order of magnitude more complicated, more costly, less efficient, a greater drain on the economy, and more of a pain in the fourth point of contact.

So, if President Trump really wants to eliminate the IRS, to stand up the External Revenue Service, and transfer the funding of government to tariffs, then there must be a repeal of the 16th Amendment in the bargain.

Mr. Block concludes:

To put it another way, if we accept that there has to be a government, and it therefore needs some revenue to function, this might be the least-bad option.
Should we worry about so many people becoming unemployed? Not at all. A similar sort of thing occurred when the car replaced the horse and buggy, when the cell phone substituted for Kodak, when we switched from typewriters to computers, etc. We are all the richer for this sort of thing, and will be in this case too.

We can concede that there has to be some government; there are certain distributed interests, like the military and diplomatic relations with other nations, that only government can readily handle. But this is a good point; whatever means we use to fund that government should be lean, it should be efficient, and it should be the least drag on the economy that we can make it.

Editor's Note: President Trump is leading America into the "Golden Age" as Democrats try desperately to stop it.

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