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OBBA polls poorly

Conventional political wisdom says tax cuts are popular. People don’t like paying taxes and do like when politicians cut them.

TCJA was an exception. For example, a 2018 Pew Poll showed 37% approved and 46% disapproved of its overall long-term effect on the country (without the long-term qualifier the gap was slightly smaller).

Unlike TCJA, OBBBA was not just a tax cut, but a budget bill that cut spending (albeit off in the future) to partially offset the lost revenue from the tax cut. That makes it more challenging politically. Not surprisingly, polling typically finds an approval rate lower than TCJA’s. Pew found 33% approval and 46% disapproval, a 3-percentage point larger gap than for Pew’s 2018 TCJA poll. Small difference and, of course, both are strongly correlated with partisan affiliation.

Refunds to the rescue?

This has the GOP worried.¹ So, their natural reaction is revise how they are marketing it. Everything is a marketing problem. First step is rebranding (i.e., to change the weird name that the Marketeer in Chief gave to it). The NYTimes reports they have settled on Working Families Tax Cut.²

The second step is to stick your head in the sand: “Let’s assume it’s not really a problem because tax cuts are popular.” In a version of this, the Times story says that Republicans are thinking OBBBA’s big refunds will be their political salvation, since the IRS has not put out new withholding tables. According to the Times:

Republicans are also banking on the simple power of direct payments to ultimately buoy the law’s popularity and, in turn, the party’s prospects in midterm elections next year. Under their design, the law will first deliver many of its benefits to American in their tax refunds next year, a lump-sum payment that may make the tax cut particularly visible to voters.

Most of the “cut” is not new, but just an extension of what people already are used to, i.e., the provisions of TCJA that otherwise would have expired. Put another way, TCJA is obviously reflected in current withholding, and its extension won’t generate refunds. Yes, OBBBA layered on new cuts, but they were relatively modest and targeted to narrow constituencies, as the Times story points out:

Republicans did layer some additional tax cuts on top of the extension. While the legislation overall is unpopular, several of these specific ideas, like tax breaks for overtime pay or tipped income, poll well with both parties. But those cuts will be valuable to only a relatively small subset of Americans, not the population overall, potentially limiting their political resonance.

About 3 percent of American workers regularly earn tips, for example, though even some of those workers may not gain anything from the change. Only Americans who owe a lot in state and local taxes will benefit from an expansion of the state and local tax deduction. And only those who buy a new car made in the United States will be able to deduct their auto loan interest.

Favored groups may notice

I thought I would dig a little deeper. The Yale Budget Lab calculated the differential impact of the new provisions versus the TCJA extension. It reports (emphasis in original):³

Many taxpayers will see little-to-no additional tax relief. For tax year 2026, we estimate that about one-third of households will see no additional benefit on top of TCJA extension. Almost half will see a tax cut of less than $100 for the year, and two thirds will see a cut of less than $500.

…

Notable tax cuts are most common in the upper-middle income range. More than half of taxpayers in the fourth income quintile (about $75,000 to $130,000) would see a tax cut of at least $500, and half of top-quintile taxpayers will see a tax cut of at least $1,000. These groups are generally more likely to benefit from the “no tax on…” provisions (including the new senior deduction) and the higher SALT cap.

Tax cuts of $100 will be hardly noticeable. The exact amount of income tax one pays or their typical refund are not very salient, unlike the price of gas which is on big signs everywhere. I would guess most folks only have a general idea of the size of their refund and $75 to $125 more will not particularly stand out. However, a tax cut of $500, which YBL estimates one-third will receive, should be noticed. But I doubt that will matter much politically because of the distribution issue described below.

Because the Joint Tax Committee (JCT) staff prepared estimates under the usual method (present law baseline) and under the Senate’s reconciliation work around (current policy baseline), it easy to filter out the estimated differences in the revenue loss for the TCJA extension versus the new tax cuts.

The new tax cuts for individuals look small compared with the total revenue loss from both the extension and the new cuts. To crudely focus on the tax year 2025 effect, I compared the FY 2025 and FY 2026 numbers.⁴ The total estimated revenue loss was just under $600 billion. By contrast, the new income tax cut for individuals, excluding the business provisions, was about $170 billion, less than a third of the cost.

Probably the bigger problem for the GOP banking on the political benefits of refunds is the concentration of the benefits of OBBBA’s new tax cuts.

The table below lists the provisions, ranked by JCT’s estimates of the revenue loss (a proxy for the tax cut amount). The dollar amounts are for federal fiscal years 2025 and 2026 – i.e., for all of calendar year 2025 and the first three quarters of calendar year 2026. This will capture some of the tax year 2026 effects, since the JCT estimates reflect that people will adjust their estimated payments and withholding during January through September of 2026.

Provision	$ amount	% of total
Expand SALT deduction	(39,247)	22.8%
No tax on overtime	(32,806)	19.1%
Senior deduction	(32,314)	18.8%
Increased std deduct	(26,503)	15.4%
No tax on tips	(10,121)	5.9%
Enhancement of child credit	(10,014)	5.8%
Car loan interest deduction	(7,332)	4.3%
Trump accounts	(7,177)	4.2%
Enhanced rates	(4,948)	2.9%
Enhanced adoption credit	(608)	0.4%
Enhanced child and dependent tax credit	(409)	0.2%
Enhanced dependent care assist	(365)	0.2%
Enhanced employer-provided child credit	(45)	0.0%
Total	(171,889)

GOP political payoff?

The provisions with the largest costs confer benefits on narrow categories of taxpayers. The standard deduction and rate changes apply broadly but are less than 20% of the cut. The senior deduction (another 19%) applies somewhat broadly (TPC estimates about 13% of tax units and half of those over 65). The rest of the cuts – over 60% – are narrowly targeted. Proportionately few households earn material overtime, receive tip income (and have tax), take out a car loan, or had a baby during the year (to get a $1k Trump account).⁵

Expanded SALT deduction

The largest benefit, the increase in the SALT deduction limit to $40k, will narrowly benefit mainly upper middle-income households and often in blue states. Here’s the Yale Budget Lab graph.

Tips and Overtime

The politics are probably going to come down to the refunds generated by the exemptions for tip and overtime pay income, two of Trump’s big headline political points during the campaign.

A preliminary TPC estimate is that the exemption for tip income will benefit 3% of tax units and for overtime pay about 9%.⁶ See the TPC graph below for the distribution of the benefit by income:

This TPC graph shows the distribution of tip income workers by state.

Overtime pay provides a bigger buck exemption and is likely to generate bigger refunds but is also harder to get a handle using government data on who will benefit. The Yale Budget Lab estimates that about 60% of employees qualify for overtime under the Fair Labor Standards Act, but only 8% of hourly employees and 4% of salaried employees regularly collect it.

Midterm benefits?

The political question is whether biggish refunds from expanded SALT deductibility, tips, and overtime pay will help overcome the general antipathy to OBBBA. The crucial focus must be on persuadable or swing voters in the polarized political world we now live in. The vast majority (maybe 90%) of voters are going to vote based on the candidate’s party in almost all cases. That’s even more likely in low-turnout midterm elections. Moreover, these illusive swing voters only matter in the handful of swing districts for House races and states with Senate seats that are actually in play.

Some relevant factors that occur to me:

The benefits (refunds?) from the expanded SALT deduction will be concentrated at the top. Those are not the voters that the Republicans have been gaining ground with; instead, they have been migrating to the Dems. What’s worse for the GOP, the beneficiaries will be disproportionately in blue and purple states. That might help them in arguable competitive Senate races in blue or purple states (Maine, Minnesota, New Hampshire, and North Carolina).
Per the TPC graph, tipped workers are concentrated in red states with Nevada and Wisconsin, two purple states, being the obvious exceptions. (Hawaii is a deep blue state that also has a lot of tipped workers. It’s irrelevant to the political calculations.) That is obviously not a good thing politically for the GOP if they’re looking for an advantage in the midterms. No Senate seat is up in either Nevada or Wisconsin.
Tipped workers are heavily female. According to TPC, over 70% of tipped workers are female. Of course, the Dems do much better with female voters and especially women of color (over 29% of tipped workers according to TPC), the most reliable of the Dems’ base voters. Will the exemption cause a material number of them to instead vote for Republicans? I doubt it. That is probably not good news for the GOP.
Gaming out the effect of the overtime pay exemption is more difficult because of the lack of data. My perception is that unionized workers in the private sector, particularly in manufacturing, and public safety employees (cops and firefighters) are the prime recipients of regular and larger amounts of overtime pay. The GOP already does well with both groups. Cops and firefighters are the outliers among public employees – their partisan allegiance tends Republican. It doesn’t seem like a fertile hunting ground to look for voters to swing from the Dems to the GOP.
More fundamentally, I’m dubious about the political benefits of modest increases in income tax refunds. I suspect that most voters look to the future, rather than rewarding politicians for what they have already done. The tips and overtime pay were modestly big issues in 2024 campaign, Trump won, and the expectations are already baked in. I don’t think the Dems got much mileage in the 2022 midterms out of their generous increase in the child tax credit in the 2021 American Rescue Plan. That expansion had a much broader and more dramatic effect. Its benefits ($85 billion/year) exceeded in dollar terms the sum of the exemptions for seniors, tips, and overtime pay.

Bottom line: I don’t think refunds will bail out GOP from adverse public perceptions of OBBBA. That does not mean opposing OBBBA will be a winning midterm campaign issue for Dems, though. That will depend upon political messaging, media coverage, campaigning, and (potentially) random events (recall how 9/11 threw the 2002 midterms to the GOP).

I know little about effective political messaging, but I’m highly skeptical of what appears to be the Angie Craig approach (see note 1) that muddies what should be unambiguous Dem opposition to OBBBA. Key points in my amateur attempt:

Unaffordable: We can’t afford to borrow money to hand out more tax cuts. That’s what OBBBA does. Federal debt is at unsustainable levels. To the extent they’re paying with tariffs (plenty Trump quotes to cite), that’s anti-growth and a tax that falls heavily on low- and middle-income people.
Unfair: OBBBA is both tilted to the top and picks favorites (tips, overtime pay, car loans, etc.). Sure, tipped employees are deserving and often underpaid, but why should they pay less tax than a factory or warehouse worker with the exact same income? Unless you believe in the fiscal fairy, exempting some means everybody else pays more or gets less.
Cuts crucial services: Cuts to health care (Medicaid and failure to extend ACA tax credits) and food aid (SNAP) hurt many people across all parts of the country, rural and urban, Republican and Democratic.
In short, don’t do anything to imply OBBBA may be okay/good, if only they had modestly changed its emphasis.

Silver Lining

One glimmer of light is that the administration’s political concerns about making sure that OBBBA is administered (i.e., the 2025 tax filing system works smoothly and the refunds get paid) likely means that the IRS will be saved from shutdown revenge reeked on “Democrat agencies.”

That appears to be the case so far. See this table from the NY Times that shows only 2% of Treasury employees have been furloughed:

Environmental Protection Agency — Sources: Official government agency websites; numbers for the Treasury are partial and exclude two small subagencies that have not yet released plans.

Education — Sources: Official government agency websites; numbers for the Treasury are partial and exclude two small subagencies that have not yet released plans.

Agency	Total employees	Planned furloughs	Share
Environmental Protection Agency	15,166	13,432	89%
Education	2,447	2,117	87
Commerce	42,984	34,711	81
Labor	12,916	9,792	76
Housing and Urban Development	6,105	4,359	71
State	26,995	16,651	62
Energy	13,812	8,105	59
Interior	58,619	30,996	53
Agriculture	85,907	42,256	49
Defense (civilian work force)	741,477	334,904	45
Health and Human Services	79,717	32,460	41
Small Business Administration	6,201	1,456	23
Transportation	53,717	12,213	23
Social Security Administration	51,825	6,197	12
Justice	115,131	12,840	11
Office of Personnel Management	2,007	210	10
Homeland Security	271,927	14,184	5
Veterans Affairs	461,499	14,874	3
Treasury	81,165	1,736	2

This Bloomberg article says that if the shutdown persists, IRS plans to lay off 35,000 employees but not those “working on filing season activities, implementing legislation, and IT modernization.” Getting refunds out and implementing their new law is “essential” collecting tax (auditing and exam) is not. Got it.

Notes

Perversely, some Dems, including Angie Craig, are worried (WSJ) but for the opposite reason – parts of OBBBA poll well (e.g., exempting tips and breaks for seniors). The response is to expand them. Yikes. Bad policy idea and it endorses a fundamental flaw in the OBBBA’s strategy, government borrowing to hand out tax cut goodies to favored constituencies. It’s bad both because we can’t afford them and they’re unfair, treating people with the same incomes unequally. All this reflects the uncertainty of political winds and why politicians that try to sail with them, rather than expressing their core convictions (e.g., like AOC and Bernie on the left or Liz Cheney on the right do), look like Caspar Milquetoast. Not what inspires confidence in a leader IMO. ↩︎
I’m sure that the Dems will be in the rebranding business too, claiming OBBBA really stands for One Big Billionaires’ Bailout (or Benefit) Act or something catchier. ↩︎
Because these estimates are for next year (2026), they are likely slightly higher than the 2025 refund effect, but close enough for our purposes. ↩︎
That captures a fair amount of the tax year 2026 effect as well, unfortunately. ↩︎
That assumes they know enough to apply for a Trump account for their baby. Will applications be included in hospital packages for new parents? I would not be surprised if the administration provides a presidential letter claiming responsibility – similar to Trump’s rebate letters during COVID. ↩︎
Of course, it would be no surprise if a lot more tip income miraculously appears (compared to the estimates), once it is exempt. Congress left many issues to the IRS and there is a fair amount of grey area for the aggressive to game, legally or illegally. ↩︎

Tags OBBBA

Uncategorized

Shutdown Musings

We’re at the end of the federal fiscal year with the likelihood of yet another government shutdown. I assume that will happen or whether the Dems will conclude at the eleventh hour that a shutdown is in neither their political nor the nation’s interests.¹

Back in March, I assume they concluded that a shutdown would simply make more of the DOGE rampage through the federal government legal. That was so because a shutdown gives the executive wide discretion to determine what is an essential function and can continue despite the lack of appropriations. That concern has lessened a bit with the tempering of DOGE, probably increasing the likelihood of a shutdown.² The messages out of DC confirm that a shutdown is highly likely. I see no good coming of this, no matter which course the Dems take.

The Dems are going to hold out for health care funding – reversing some or all of OBBBA’s health care cuts.³ Given that tax increases are surely off the table – as a matter of principle for Republicans and as a matter of politics for Democrats – that presents a classic Hobson’s choice (at least for me).⁴ Is it better to:

Increase an already unsustainably growing federal deficit by spending more on ACA tax credits – a serious long-term fiscal and economic risk of unclear dimensions; or
Make individual health insurance much more expensive for lower-middle income households who rely the tax credits – effectively throwing millions of folks off health coverage because they can’t afford it?

It might be fun to speculate about the political pros and cons of the Dems’ choice of whether to shutdown government to preserve health care coverage for a swath of folks in the individual market (a policy good) or to allow that to happen so the public can see the real impact of the Republican’s OBBBA decisions (a Dem political good possibly).⁵ Weighing in on such questions is NOT my comparative advantage. I’ll leave it to politicos and pundits.

Instead, I think a little thought experiment is useful. In a world where tax increases are not an impossibility, could the Dems’ fund their health care demands with reasonable tax increases that:

Are progressive and apply overwhelmingly to households with incomes north of $200k;
Do not increase rates – corporate or individual (As an aside, it’s still a political mystery to me that the Dems were unable to increase the corporate rates at all when they had Congressional majorities, given that neither Manchin nor Sinema were unlikely to and ultimately did not run again. They must really believe that the corporate rates matter a lot.); and
Leave untouched the idiotic “small business” break (i.e., QBI or the 20% exclusion for pass through entities)?

At the request of the Dems, CBO has estimated the 10-year cost of their health care proposals (i.e., enacting them permanently). The numbers are in the table below. Descriptions of what is involved with the various spending is in the CBO memo. Note that this addresses only the ACA related provisions, not the full Medicaid cuts in OBBBA, a much bigger fiscal nut to crack.

Provision	Cost ($ billions)	Increased # of insureds (millions)
Expanded premium tax credit permanently	$350	3.8
Nullify final admin rule	40	0.3
Repeal OBBBA’s ACA provisions	272	2.9
TOTAL	$662	7

Thus, the total cost is a little less than $700 billion. It’s worth noting that repealing the OBBBA provisions are the provisions that deny ACA benefits to various immigrant groups (not unauthorized aliens FWIW), such as those on temporary protected status, with pending asylum claims, and so forth. They do not take effect typically until 2026 (one provisions is delayed until 2028).

It is easy to assemble a list of tax increases meeting my three criteria above. The table below shows some possibilities that can be justified on a policy basis.⁶ The numbers for reversing OBBBA’s provisions are from the JCT estimates, the other two are per CFRB.

Provisions	Revenue in billions
Reverse TCJA/OBBBA estate and gift tax expansion	$212
Revert to TCJA’s SALT deduction	142
Limit charity deduction to cash > 2% of AGI	500
Apply NIIT to PIT income not subject to SECA	490
TOTAL	$1,344

The total from this limited list of high-buck options is almost twice the cost of the health care provisions, providing plenty of room to soften their impact by phasing them in, raising the dollar limits, lowering percentage inclusions, and so forth. Many small dollar options are also available, such as taxing carried interest of hedge fund and private equity investors as ordinary income rather than capital gains.

The estate and gift tax reversal would still provide a lifetime exemption for married couples that exceeds $16 million, indexed for inflation. That is sufficiently generous. The current antipathy for estate taxation is one of life’s imponderables, given its historic popularity. It must be a political messaging problem. The tax only affects a tiny percentage of the population.

OBBBA’s quadrupling of the SALT deduction limit to $40K is both regressive and unnecessary. (Disclosure: it will save me a material amount of tax. It’s still a bad idea.) The revenues from the SALT deduction limit could be further increased by reversing the IRS’s administrative decision to allow deduction of income taxes directly imposed on pass through entities. (That decision was probably contrary to the statute, but no one has both standing and an incentive to challenge it.) When OBBBA was under consideration, the congressional committees considered various options for limiting deductibility, one of which was in the House passed version but was ultimately dropped. Getting rid of it would treat wage earners and investors in stocks and bonds more equally with owners of pass-through business entities.

OBBBA already imposes a 0.5% AGI floor on charitable contribution deductions, starting for contributions next year. Ratcheting that up and imposing some sort of limit on the ability to deduct the fair market value of appreciated property makes both policy sense and can raise a lot of revenue. This is a favorite hobby horse of mine.

The final option – imposing the Net Investment Income Tax on (mostly) S corporation distributions – would close the John Edwards/Newt Gingrich loophole and treat S corporation shareholders similarly to partners. It only applies at incomes above $200k (single and head of household) and $250k (married joint).⁷ The amount of revenue involved never ceases to amaze me.

Bottom line: there are plenty of tax increases that should be politically acceptable to offset the cost of the Dems’ heath care proposals. In the current environment where any tax increases (except tariffs) are toxic, none of this will be considered. The more likely outcome is a compromise that increases the deficit by temporarily extending some of the Dems’ health care demands.

Notes

The Kashi prediction market assigns a 82% probability of a shutdown as I write this. ↩︎
The administration is trying to reanimate it by threatening mass firings of federal employees. Past practice would counsel Dems to take the administration seriously on stuff like this, not just to assume it’s a negotiating bluff. ↩︎
Technically, OBBBA did not cut the ACA tax credit enhancement that was enacted during the pandemic. It allowed it to expire. OBBBA did make some ACA related cuts, terminating credits for immigrant groups, in addition to its major Medicaid cuts. ↩︎
I assume that when push comes to shove, the issue will be whether to temporarily extend the enhanced ACA tax credits. The cuts in the out years are just too far off and too large to address. My amateur guess at the politics. ↩︎
The latter option is occasionally referred to as touching the hot stove – essentially helping Trump voters realize the real-world consequences of Republican policies that are inconsistent with the populist campaign rhetoric they may have thought they were voting for. ↩︎
My first preference would be simply to repeal QBI. That would more than solve the problem if the repeal were effective for tax year 2027. It’s been made absolutely clear that despite QBI’s lack of any policy basis both parties support it, fairly strongly. Sigh. ↩︎
Here’s how Penn-Wharton succinctly describes it: “Under current law, individuals with high wage or self-employment earnings are generally subject to a 0.9% additional Medicare payroll tax on top of the 2.9% Medicare payroll tax. Similarly, individuals with high investment earnings are subject to a 3.8% net investment income tax (NIIT). However, certain pass-through business income of limited partners and S corporation shareholders escapes both of those forms of high-income taxation. This policy would expand the NIIT base to ensure that all pass-through business income would be subject to the NIIT.” ↩︎

Tags budget deficit

books

Books I’ve Read Recently – A World After Liberalism

Post author By saltspeak
Post date September 17, 2025
No Comments on Books I’ve Read Recently – A World After Liberalism

This is another in my series of bad high school book reports on selected nonfiction books that I have read recently. I write them to memorialize my thoughts in the vain hope that I will remember a bit more of what I read.

Author and book

Matthew Rose, A World After Liberalism (Yale University Press 2021).

I was not familiar with Rose. The book lists him as the Director of the Barry Center on the University and Intellectual Life at the Morningside Institute. Its website says he is a scholar of modern religious thought. He has a University of Chicago PhD, but the website does not list the academic discipline it is in. He formerly taught at Villanova.

Why I read it

Reading this was part of my quest to better understand the philosophical underpinnings of Republican populism and the MAGA movement.¹ The book was recommended by Damon Linker who has a Substack newsletter that I occasionally read.

What I found interesting

Rose’s premise, which I agree with, is that we are living in a post-liberal moment. That’s liberal in the small “l” sense model of government, i.e., a democratic order based on the values of freedom and equality with protections for individual liberties.

In Rose’s words:

After three decades of dominance [presumably after the civil rights acts expansion of the franchise], liberalism is losing its hold on Western minds. Its most serious challenge does not come from regimes in China, Russia, or Central Europe, * * * [but] from within Western democracies themselves, where intelligent critics, and not just angry populists, are expressing doubts about its most basic norms.

* * *

A new conservatism, unlike any in recent memory is coming into view. * * * There is disagreement about how this intellectual space opened up, but there is no doubt about who is filling it. Nationalists, populists, identitarians, futurists, and religious traditionalists are vying to define conservatism in ways previously unimaginable. pp. 2 -3

The competitors for the radical right’s ideas include the likes of Curtis Yarvin, Angelo Codeville, Adrian Vermeule, Costin Alamariu, and others. The book is not about them, but five earlier thinkers (all except one, now dead), who are profiled and their thinking described, each in a chapter. Rose calls these “essay-portraits that focus on the arguments and intellectual backgrounds of their subjects.” (p. 11) He chose them for their importance and continued fascination for more intellectual righty types. The book concludes with a chapter titled, “The Christian Question,” consistent with Rose’s background in religious studies and the importance of religious themes to some of thinkers and to the movement generally.

In general, I found the book’s short introduction insightful. It describes what seem to me plausible themes explaining why the new right rejects the liberal order that most of us, regardless of partisanship or ideological preferences, have long accepted. The central insight is that they have a different understanding of human nature and its potentialities. In their view, liberalism, which is based on respect for individual autonomy and is dependent on individuals’ ability to make good choices and decisions, is based on a misperception of humanity, which is fundamentally tribal (i.e., dependent on one’s ethno-cultural origins). That reality cannot be denied or overcome. So they consider liberalism empirically wrong as a description of the human condition and society.

Even more important:

It held that as a moral vision of life, liberalism was evil. Not only in practice, where its understanding of human nature encouraged hedonism, selfishness, and mediocrity. Liberalism is evil in principle because it destroys the foundation of social order. * * * Politics is properly illiberal about everything, depending, from its smallest decisions to its highest goals, on judgments about human greatness. Liberalism for its part, promotes equality of lifestyles, declining to tell citizens how to become virtuous or great. And as a result, it slowly renders people incapable of answering life’s most basic question. (pp. 9-10)

These insights explain why the radical Right rejects liberalism and its attraction to authoritarianism IMO. But their agreement ends with rejection of liberalism, not what should replace it. The following are my attempts to capture a few of Rose’s insights for each of his five thinkers. I have not read any of their books or articles and before reading Rose’s account was unaware of a couple of them. Rose comes up with a descriptive title for each, which I list as well as their home country.

Oswald Spengler (GR) – The Prophet

Spengler was one of a collection of influential conservatives in Weimar Germany (Carl Schmitt was another who I was more familiar with). Weirdly (keep in mind when he was writing), Spengler predicted the western decline at the end of the millennium (i.e., now), which he defined as the colored world attaining parity with West (“white”) world. This was the bigger deal than what was going on Germany at the time!²

In Spengler’s view, people are defined by and captives of their cultures. One’s culture is one’s destiny. He was a cultural relativist. Western culture (“Faustian” in his terms) wasn’t superior to Chinese culture, for example. But, according to Rose:

He advanced a stronger argument, or so he judged. He argued that European peoples and their culture are one, and that any attempt to compromise their unity would be fatal to both. p. 28 (emphasis in original).

For Spengler, the essence of Western culture was the ambition, energy, creativity etc. of the “Faustian man.” Rose contrasts him with Max Weber’s views (“objectivity, restraint, and logic as the motive force Western culture”) as instead irrational passion and energy (“personal striving” in Rose’s formulation. (p. 31)

Given this, Spengler not surprisingly rejected Christian doctrine or the hypothesis that Christianity was at the center of Western culture.

Julius Evola (I) – The Fantasist

I had never heard of Evola who was, according to Rose, the leading theorist of Italian neofascism. (p. 41) He constructed a fantastic world that was the antithesis of the liberal order – one that merged the sacred and the political. He was spiritual, but not religious. A cardinal flaw of Christianity, in his view, was the doctrine of the two kingdoms, the separation of the spiritual and temporal.³

The political problem with modernity was that it denied the core universal truth (“Tradition”) at the foundation of all social orders. That power and authority are top down, not bottoms up, contrary to liberalism’s evils of individualism, materialism, and egalitarianism. The law of life is inequality. (p. 51) Anti-democratic and authoritarian themes abound.

Francis Parker Yockey (USA) – The Anti-Semite

Among Rose’s oddball lot, Yockey’s biography stands out as the most bizarre. Rose characterizes him as “arguably America’s preeminent fascist theorist” (p. 66). He, like others of Rose’s theorists, connected liberalism and communism as associated evils and posited the need for a cultural, social order that escaped the evils of communist slavery and the anomie of liberalism, in Rose’s formulation.⁴

At its core, his philosophy was based on his weird formulation of the superiority of Western culture (“cultural vitalism”), based on a combination of human risk taking and the great man theory of history. Rose credits him with the development what the Right now calls cultural Marxism. (p. 79)

He, again like most of Rose’s collection, was an anti-rationalist. Rose’s defining characterization of him as an anti-Semite (he clearly was in spades) reflects his belief that Jewish thought was using post-Enlightenment rationality to undermine Western culture.

Alain de Benoist (FR) – the Pagan

Benoist is the only one of Rose’s subjects who is still alive. Rose characterizes him the “principal architect of ‘identitarianism[,]’” the movement that fears cultural dilution by immigration, an increasing fixture on the Right – formerly only in Europe but now here. He explicitly describes his philosophy as illiberal, relativist, and pagan – anti-Christian and inequalitarian. He claims his philosophy is based on nominalism – a convenient way to promote differences and reject universals (e.g., liberalism’s core principle of respecting all individuals equally).⁵

Rejection of liberal democracy follows naturally from those premises. Instead, he favored “folk democracy” which is based on his view of ancient Greek democracy that limits the franchise to a particular people who share a homeland and history. You can see where this is going. The flaw in liberalism is that it “transfers sovereignty from the united ‘folk’ to the autonomous individual” (p. 97). Hence, identitarianism.

There’s even more: not only does identity depend on being part of the group, it also is defined by its opposition to outsiders. The idea that a society could functionally be open to all comers on an equal basis (e.g., as expressed on the base of the Statute of Liberty) is an impossibility. It’s a recipe for the classic blood and soil conservativism.

Samuel Francis (USA) – The Nationalist

I was familiar with Francis as a result of reading When the Clock Broke. Rose’s shorter essay is more nuanced and enlightening than the Ganz book IMO.⁶ Francis’s views track most closely with Trumpism and MAGA, FWIW.

Based on Rose’s description of his writings, I have difficulty considering Francis to be a political theorist or philosopher in the traditional sense (i.e., reflecting upon normative principles of social governance and organization). Rather, his thinking focuses somewhat more on observing/describing the social-political behavior of polities. In Rose’s description:

Francis’s deepening suspicion was that the study of politics is not principally the study of ideas at all. It is the study of power – how it is acquired, lost, used, and concealed by a dominant minority. The primary political question, he concluded, is always which elites shall rule, not whether elites shall rule. (p. 117)

Traditional conservatism, in his view, was an obsolete ideology of an out of power elite (the classic Liberty League, anti-New Deal, crowd, I guess, whose dominant principle was classic laissez faire). To Francis, dominant liberalism purportedly supported egalitarianism but really was about subverting traditional ways of life. He was strongly influenced by James Burnham, a more classic conservative, and Burnham’s analysis that modern societies had become “managerial mega-states” dominated by elites using administrative and technological tools. This regime did not benefit, in Francis’s view, the white middle working class.

His response was to oppose this liberal elite regime with a “Middle American Revolution” (white, middle- and lower-income earners without college educations – i.e., the now core Trump voter). This is a kind of identity politics. And it strikes me as just political tactics rather than a philosophy to animate a set of fundamental rules for governing. But it clearly maps on to the current dominant GOP political strategy and demonstrates how Francis was well ahead of his time in that regard. (He died in 2005 when the GOP was still mostly a traditional conservative party.)

Christianity and the radical right

The book’s last chapter is in some ways its most interesting. Given Rose’s background in religious studies, it focuses on a common thread in the ideas of his five subjects – i.e., their opposition to Christianity. This seems counterintuitive, given the popularity of Christian Nationalism in today’s GOP. But it’s a clear theme in Rose’s characterization of his subjects’ philosophies and as he points out, a theme of the classic alt-right. (pp. 137-38)

As Rose puts it:

To state their views succinctly, if also crudely: the radical right critique Christianity for nurturing individual freedom, not suppressing it; for undermining human inequalities, not upholding them; for being rationalistic, not irrational; for its openness, not its exclusivity; for being apolitical, not political; for living up to its ideals, not betraying them. What is shocking about these formulations is that they invert the conventional terms of intellectual discussion. They accuse Christianity of being the cause of modern values it is often blamed for impeding. (pp. 140-41) [emphasis in original].

The problem is Christianity’s (in the radical right’s view) consideration of or respect for individuals per se, as expressed in the second great commandment (“Love your neighbor as yourself” Matt. 22:29). This makes Christianity’s resulting social justice views the progenitor of liberalism:

Liberalism is a secular expression of the Christian teaching that the individual is sacred and deserving of protection. Socialism is a secular expression of Christian concern for the poor and downtrodden. Globalism is a secular expression of the Christian hope that history is leading to a kingdom of universal peace and justice. (p. 142)

He notes that the movement is only partially anti-Christian and can also “clothe itself in Christianity, claiming a religious mantle for its defense of ethnic and cultural identity.” (p. 147) It can lead to a variant on identity politics (hello, Christian Nationalists). Rose has a number of prescriptive suggestions for dealing with this that I found less than compelling.

What disappointed me

I found the book interesting and a useful short introduction to the eclectic and very unsettling thinking by parts of the populist right. Its brevity and pithy descriptions, while a virtue on one level, left me wanting more extensive discussions – at least in some cases.

Rose asserts he selected each of the five subjects because they were/are influential with the populist Right. I would have liked more documentation and discussion of his basis for that. He does some of that, but it would have been nice to see more to judge how important each of them is to the movement. I’m a numbers guy (unlike Rose and most/all philosopher types), so citation numbers or at least more anecdotal examples would have been helpful to me. He does a good job of that with Sam Francis, but less so the others.

SALT connection

My Take

I found the book to be very interesting and scary: it provided some validation of my perception that the American conservatism as I knew it is largely history in favor of the European, ethno-nationalism version that I assumed was inconsistent with the heterogeneous nature of American society.

What strikes me most is the strong cultural conservatism elements and anti-rationalism that animates this thinking. The anti-rationalism is consistent with the thesis of Enchanted America – Intuitionists have migrated to the GOP and the conservative movement generally. This flavor of political philosophy is something only an Intuitionist could love, as far as I can tell.

I find it perplexing that the limited government, libertarian-oriented element of the traditional conservative movement in America can find common ground with those animated by this type of thinking. Its rejection of respect for individualism, free market principles, limits on government, and similar formerly core principles of American conservativism, one would think, are disqualifying. Wrong. Continued support can only be explained by the idea that the New Right’s authoritarian wielding of government power, as we are witnessing now, is less threatening than a social welfare state, even one constructed and managed by a democratic regime that at least ostensively hews to rationale principles. A true headscratcher.

Notes

I continue to be mystified by what its motivating and organizing ideology is, assuming it truly has one. It may be largely a cult of personality, although its strong antecedents that predate Trump suggest otherwise. I think Newt Gingrich is the more central figure than Trump. Trump just saw a vulnerable movement and a party that was ripe for his demagogic takeover. ↩︎
Rose takes pains to describe how Spengler attempted to distinguish himself from the typical racialist, decrying the rampant bigotry of his time and country. He also rejected race classifications altogether. p. 37. ↩︎
That view reveals a potential seed of Christian Nationalism, which fixes his perceived flaw in orthodox Christian doctrine. ↩︎
Interestingly, Yockey correctly predicted the reversion of the USSR to Russian nationalism (i.e., Putin’s Russia) in the 1950s! Yockey both collaborated with the Nazis and worked for communist eastern European governments in the postwar period. A truly weird character, probably partially due to his documented mental health issues. ↩︎
Why he rejects Christianity is obvious. That all people are create in the image of God and have equal dignity in God’s eyes is disqualifying. ↩︎
This probably results because of their differing professional backgrounds and perspectives. Ganz is a political journalist and evaluates Francis from that perspective, while Rose evaluates his basic ideas as one with an academic philosophy background would. Francis, as I noted, more of a de facto right-wing political consultant than a philosopher/thinker. But Rose evaluates him as the latter. I’m not convinced that Ganz read Francis’s posthumously published book, Leviathan and Its Enemies, that Rose considers his most substantial work and a synthesis of his thinking into a single work. Given Rose’s description of it as long, disorganized, and repetitive, that would be no surprise. ↩︎

Uncategorized

What’s in a name?

Words and language matter. Especially in politics. Language, the ability to communicate complexity, distinguishes us from other fauna, and is responsible for our species’ success.

Whatever you think of Trump, his person or politics, he is a master of political communication.¹ But to even the mildly sophisticated, his communications often seem comical, if not ridiculous.² His name for the big tax and budget bill: OBBBA, the One Big Beautiful Bill, is a case in point. Even if far from the funniest, most ridiculous, or absurd.

I like to read John McWhorter’s NY Times column because of his skill at documenting and providing insights into the hidden meaning and nuances of language, including Trump’s. One paragraph from his most recent column struck such a chord that I felt I had to archive it. (The whole column is worth reading.) His column focuses on Trump renaming DOD as the Department of War and how it reflects his consistent pattern of being active, rather than reactive, always on attack. But the quote relates to OBBBA:

Even Trump’s most positive-sounding coinages are acts of a certain kind of verbal aggression. I sometimes stop to marvel that the House passed something with the actual official title the One Big, Beautiful Bill Act. That goofy bark of a name is a boisterous clap back against opposing views, an attempt to drown out inconvenient facts with braggadocio. It is a linguistic snap of the locker room towel. Every Democrat in Congress, a few Republicans and hordes of people across the land thought the bill was a tragedy. For Trump to nevertheless call it big and beautiful, as if it were one of his buildings or a hairdo, was a jeering “Ha ha!” from Nelson Muntz of “The Simpsons.” This includes the informality of the phrasing. “Big Beautiful Bill”? Imagine the 13th Amendment, abolishing slavery, titled Eat It, Secessionists!

Notes

His failures as a basic businessman, casino owner, developer and so on are well documented, but his years as a marketeer, salesperson, TV personality, and general shill honed his native communication skills. ↩︎
Many must work politically or at least are not political liabilities. ↩︎

Tags OBBBA

income tax tax administration

EV = EVery year

Reading pro se tax court case can be amusing and head scratching. As in how could you actually make the court spend so much time on this meritless case?

Case in point: Artena and Kenneth Moon v. CIR. The court disallowed the taxpayer’s claim of a $7,500 EV credit for their Chevrolet Volt in tax year 2019. They bought the car in 2013 and claimed the credit in that year and every year after until the IRS issued a NOD for TY 2019. Makes one wonder what took the IRS so long?

Apparently, taxpayers thought they were placing the car in service each year and, thus, should get the credit each year. The opinion explains what “placed in service” means based on regulations for other Code sections (i.e., a one-time event, the first time you start using a piece of equipment in simplistic terms), and observes:

Accordingly, petitioners’ Chevrolet Volt was placed in service in 2013. We note that prior to the year in issue, petitioners had claimed the maximum $7,500 one-time section [IRC section] 30D credit on their 2013, 2014, 2015, 2016, 2017, and 2018 tax returns. The credit was allowable only for the taxable year petitioners’ vehicle was first placed in service. Petitioners certainly were not entitled to the credit relating to 2019.

Editorial aside: the court’s modifying “placed in service” with “first” is redundant. Judge Foley probably thought it was appropriate to provide clarity and emphasis. I suspect the taxpayer wonder why “first” was not in the instructions/form or the Code.

The taxpayers went through all the necessary procedural steps to get their case heard and decided (37 docket entries in Dawson). I guess they must have bought the narrative that these credits are truly the Green New Scam – otherwise, how could they think they could get tax credits that well exceed what they paid for the car (>$52k, in their case)? Yikes.¹

Their reward: the IRS relented on imposing the accuracy-related penalty. I assume they have gotten NODs for one or two back years, and the accrued interest will likely be substantial. But the statute has surely run on multiple of those years (NOD in the case was issued 5/18/2021; by that point the SOL had run for 2014, 2015, and 2016). It’s likely they came out ahead. Idiocy has its rewards.

Note

If it seems too good to be true, a rational person pauses and double checks. FWIW, the relevant form requires entry of the specific day the vehicle was place in service. The logical conclusion is there is only one day for each taxpayer and car, I’d think. The IRS must have considered this to be self-explanatory; there are no instructions for that line of the form. And nowhere that I can see did the IRS information say the credit was one-time or similar. I suppose these taxpayers entered January 1 for each of the relevant tax year after 2013, the year they purchased and starting using the car, figuring that was the day they put the car in service for that tax year. ↩︎

tax administration

IRS News

Who qualifies for tip exemption?

One of Trump’s dumb tax ideas¹ that Congress codified in OBBBA is an exemption for tip income. Congress, as it often does, punted the details of which occupations qualify to the Deep State (i.e., the IRS).

Axios is out with a story that reports that the IRS will release proposed regulations that designate the qualifying occupations. The list looks consistent with my expectation of which jobs are generally tipped, except:

Home Electricians
Home Plumbers
Home Heating/Air Conditioning Mechanics and Installers

Maybe I’m just a cheapskate or miser, but I have never considered tipping a plumber or electrician. I recently had a new furnace installed and did not tip the two HVAC installers. I should check with Phil Krinkie, one of my old tax chairs who runs an HVAC company, to see how often his employees get tips (maybe they don’t disclose it to their employers?). Maybe it’s a regional thing?

Insider trading

A recent study published on SSRN by three University of Florida accounting professors has some troubling findings about potential insider stock trading by IRS employees. Here’s the abstract:

We investigate the information content of personal stock trades by IRS officials. We collect transaction-level data on over five thousand IRS officials’ personal investments and document substantial trading activity in individual stocks by officials across IRS departments. We find that IRS officials’ trades, predominantly their purchases, generate positive abnormal returns on average, consistent with officials’ information being not yet fully impounded into stock price. Next, we examine whether stock trades by these officials are associated with the firm’s future tax enforcement outcomes. For a given firm, we find IRS officials’ purchases are associated with subsequent decreases in tax reserves and specifically lapses in the statute of limitations. We also find that IRS officials’ sales are associated with subsequent unfavorable tax settlements. These findings suggest that IRS officials possess, and trade on, material tax-related information and that these trades are associated with future tax enforcement outcomes for firms.

A slightly longer and more readable description than the abstract, written by the authors, was published in the Milken Review.

I haven’t carefully read the study, but it looks statistically sound. As a policy problem, insider trading by IRS employees probably pales in comparison with stock trading by members of Congress based on their nonpublic access to information. But it should be addressed by the Service, both as a matter of probity and to maintain public confidence in tax administration. I’m sure doing so in an enforceable and sensible way will not be simple.

Data sharing with ICE

Litigation over the IRS sharing data with ICE for immigration enforcement is ongoing. One case upholding the data sharing is on appeal to the DC Court of Appeals, while another is still in the DC district court.

I assumed that it was illegal for the IRS to provide addresses of ITIN filers to ICE to enforce immigration law. That is what the IRS Manual (see clause 5) says. The statute ((2)(B)(i)) says a qualifying request must include the individual’s address. A natural conclusion is you can’t make a blanket request just to get addresses by asserting an investigation of criminal immigration violations. That appears to me to be what was done here.

Well, the government’s response is that if you provide an address, you can get the current address. With an administration that increasing appears to operate in questionable faith, that would be a major opportunity for mischief. See here (pages 28 – 33) for the government’s substantive arguments as to why it complied with the statute. The case, of course, involves a host of standing and jurisdictional type arguments.

We’ll see how this turns out. I’m not optimistic that the interests of tax compliance will prevail over enforcement of immigration law.

Shift on basis shifting

The IRS has withdrawn its 2024 notice on basis shifting tax shelters in favor of putting out a likely more taxpayer friendly version.

A NY Times article, Trump Administration Halts I.R.S. Crackdown on Major Tax Shelters (9/9/2025), reports on this rollback. These basis shifting shelters were the tax shelters deals of the decade and involve a lot of revenue.

The article also reports on congressional efforts to reign in the agency by members of Congress, which is troubling to me since I consider Larry Gibbs to be a very credible and neutral observer:

In late July, 20 House Republicans asked the I.R.S. to withdraw yet another line of attack on the transactions, one providing guidance to auditors on how to analyze the tax shelter deals.

That letter was “an attempt by elected officials to influence audits by the Internal Revenue Service of specific taxpayers,” said Larry Gibbs, who served as President Ronald Reagan’s I.R.S. commissioner. “From the standpoint of the integrity of the system, I am concerned about it. It’s politicizing the tax process.”

The I.R.S. is also turning on its own staff. Over the past several months, right-wing groups targeted the agency, accusing officials involved in the anti-tax-shelter efforts of being members of a “deep state” and biased against Republicans. The I.R.S. suspended several employees, including some who worked on the crackdowns. The highest-level official, Holly Paz, is a longtime, respected agency official who ran the division that oversees large business and was placed on leave in late July.

“Based on my experience with Holly Paz, over a number of years, she is experienced, she is professional and she has been a leader at the I.R.S.,” Mr. Gibbs said. He added, “I don’t find the attack on her to be credible.”

Notes

It’s a bad idea (policy wise, may be not politically) because it violates the cardinal tax principle of horizontal equity by favoring one type of income over others, while making the tax system less economically efficient and more complex. It encourages recharacterizing income, avoidance, and evasion. Dumb all around, even if tipped employees are a generally deserving class of potential beneficiaries of tax largesse. ↩︎

Tags donald-trump, immigration, IRS

Uncategorized

Tariff revenue update

Last week, CBO updated its 2025-35 estimate of the increased tariff revenues attributable to Trump’s actions by a cool $1 trillion compared to the previous estimate in June. The total increase in revenue is $3.3 trillion with an additional $0.7 trillion lower borrowing costs for $4 trillion in total deficit reduction. (The June estimate of revenues was $2.5 trillion in increased revenue and $0.5 trillion in reduced borrowing costs.)

The main reason for the revenue increase is that administrative actions since June have increased the effective tariff rates. According to CBO:

the effective tariff rate for goods imported into the United States has increased by about 18 percentage points when measured against 2024 trade flows.

That is a shockingly large increase. The prior average was less than 3% (it was 1.8% before Trump 1). So, this was more than a 6X increase. The CBO blog post lists a variety of the specific rates – many are 25% and some 50% (steel, aluminum, and copper). Note that the latter are all inputs for US manufacturers. If the goal (aside from collecting revenues) is to stimulate US manufacturing, it’s being carried out in highly selective ways.

If the revenue projection proves to be accurate, the revenues increase (i.e., tax increase) and lower borrowing costs would come close to offsetting OBBBA’s increase in the deficit. That is a very big IF IMO for two reasons.

First, I’m skeptical that tariff revenues will actually materialize at the level projected by CBO:

CBO assumes that the current tariff rates will remain in effect. As I have noted previously, the one constant with Trump’s tariffs is that they change constantly. Of course, the trend has been upward, and CBO’s estimate do not reflect some increases that have been announced but have not gone into effect (e.g., elimination of the $800 de minimis exemption or the 50% India tariff that took effect yesterday). So, maybe the revenue estimate is low! I actually think that is more likely high, because Trump responds to push back made by the right people in the right way. And I expect that to occur predominantly by businesses or other interests seeking tariff reductions, not increases. That makes it likely that the average tariff rate will erode. But Trump loves tariffs and the Trump 1 normie advisors who restrained his impulses are gone. So, who knows?
Carve-outs and administrative exemptions are also sure to be granted, if history is any guide. This will dampen down revenues, perhaps by a lot, as the effective rate declines.
The estimates are not dynamic estimates. That is, they do not take into account the macro-economic effects of high tariffs, which are almost certain to be a drag on growth. Hard to know how big this effect could be, but it would be foolish to think it won’t be material.
The estimates do not take into account retaliation. I have been surprised at how little retaliation has occurred so far. I think foreign leaders keep expecting Trump to back off (TACO as they say). But if it looks like the tariffs are enduring, more retaliation and efforts to work around them are sure to occur. That will further dampen US economic activity.
Over time, smuggling and evasion are sure to become more common.
Domestically produced substitutes will grow. Has CBO adequately taken that into account?
It’s conceivable we’re on the wrong side of the Laffer Curve with some of these tariffs.¹ That means that the drag on domestic economic activity could be bigger.
A subset of the tariffs is being challenged in two separate cases as beyond the scope of the president’s authority under the International Emergency Economic Powers Act (IEEPA). Both lower courts invalidated the tariffs, but I’m skeptical that that view will prevail when (if) the case ultimately gets to SCOTUS for a decision on the merits. I haven’t carefully looked at this but am inclined to Jack Goldsmith’s view, which reflects (partially) the strong deference SCOTUS accords to the executive in making discretionary decisions under statutes like IEEPA. I also suspect that the Court will flinch rather than blow what it likely will perceive (probably incorrectly) to be an almost trillion-dollar hole in the federal fisc (Cavenaugh’s “blast radius” comment and all that rot). The case may prove that the major question doctrine is really just an ad hoc tool for the conservative Court majority to invalidate executive actions that are inconsistent with their ideological and/or partisan priors.

Second, there is good reason to believe that OBBBA’s deficit effects will be larger than the $4 trillion estimate:

Some of OBBBA’s spending cut payfors will likely unravel. That’s been the pattern in the past, particularly with offsetting tax increases. It’s hard for me to imagine spending cuts will be much different. For example, I will be very surprised if the dramatic Medicaid cuts, especially the reductions in the provider tax rates that are off in the future, can hold when the effects on rural Republican communities become more apparent. If the Dems retake power, they’re sure to be trimmed back or outright repealed.
Some or many of OBBBA’s temporary tax cuts are likely to be extended or made permanent, further increasing its deficit effects.

There is a huge amount of uncertainty around these estimates. They are so out of range of past practice (you have to go back to Smoot-Hawley), that we don’t have much data to benchmark the estimates, such as assessing the likely behavioral responses. I continue to be highly skeptical of the enduring revenue yield.

Notes

I’m dubious about that. But Brad De Long recently made this observation: “Back when I was running the detailed models for the U.S. Treasury during the NAFTA and Uruguay Round policy wars, I was amazed at how when you ran a model with virtually any scale effects at all, the Laffer Curve argument actually worked for tariff reductions and market access-barrier removals.” ↩︎

Tags tariffs

Uncategorized

Tariffs – 6 months in

For the last three or so months, my primary tax focus has been on OBBBA’s ugly complexity.¹

In terms of revenue raising, the real action has been tariffs. It’s not easy to track what’s going on with the frequent changes. The Peterson Institute of International Economics (PIIE) maintains a timeline or tracker of tariff announcements for the second Trump administration. It is approaching 100 entries (including, admittedly, foreign responses). The administration is averaging at least a couple announcements per week, some of them quite consequential (assuming they are implemented and kept in place for a substantial amount of time). Keeping track of and understanding what is going on would be full time job for an expert in tariffs.

Any way you look at it, tariffs are the biggest or second biggest (after OBBBA) tax story of 2025. It’s a constant, chaotic story. Scanning through the PIIE timeline is all it takes to convince you of that. And it includes using tariffs for the most questionable of purposes, like sanctioning Brazil for its prosecution of its former president for attempting to overturn an election.

TPC has a graph of the timeline of major announcements that gives an impression of the transitory nature of the policy:

Moreover, we’re in uncharted territory. US tariffs have not been this high since Smoot Hawley and these tariffs are imposed and regularly changed by executive fiat, unlike the ones enacted by Congress in the old days. That gave them permanency, which allowed businesses to make long-run investments based on the price effects inherent in tariffs. All that complicates the ability of economists to predict what their economic effects will be with any level of confidence. This affects whether and how quickly the tariffs will affect pricing (i.e., passing the tax along), investment, profits, etc. – economic behavior generally.

Revenues

We do know that the tariffs are generating material amounts of federal tax revenue. Conveniently, a couple of reputable organizations are regularly tracking and posting how much revenue is being collected:

The Penn Wharton Budget Model has a real time federal budget tracker. Selecting “Taxes, Customs Duties and Related Taxes,” allows you to see the cumulative collections (updated daily). As of August 9^th, $128.1 billion had been collected, compared to $55.6 billion for the same period in 2024. So, tariff revenues are up almost $72.5 billion or a 129% increase over last year. The big revenue increases have occurred in the last two months. It’s possible an annual increase revenue could equal $600 billion as claimed by the Secretary of the Treasury, IF recently announced increases go into and stay in effect.²
PIEE also has a tariff tracker that charts tariff revenue by product type and country. Unlike Penn Wharton’s daily tracking, this is done monthly, but it provides additional detail, and it can be downloaded as an Excel file.

I continue to be skeptical that tariff revenues can prove to an enduring and reliable source of revenue to offset much of OBBBA’s cost. The political pressure to reduce the headline rates (from both foreign countries and US businesses and consumers) and to carve out exclusions (from US businesses) will erode revenues. Behavioral changes, such as reshoring, substitution and inevitably smuggling, will cause revenues to decline over time. Moreover, tariffs’ inherent inefficiency will be a drag on economic growth, slowing down income and corporate revenue growth.

With all that said, it is guaranteed that we will be collecting materially more tariff revenues over the next 3+ years than during the Biden Administration. The only question is how much more. A floor of $100 to $200 billion/year would be my guess.

Distributional effects

Given that reality, a key question is what the distributional effects of raising a lot more tariff revenues will be. The main federal tax story – OBBBA plus big tariff increases – may fundamentally be about changing who pays for the federal government services, in addition to the inevitable increase in federal debt.

In the long run, the consensus assumption of economists is that tariffs have about the same distributional effects as an excise tax on the tariffed commodity. The distributional effect will depend upon the type of product and typical purchaser (e.g., is it a basic item or a luxury good; how easy is it to substitute a non-tariffed good; etc.). A reasonable assumption, then, is that the tradeoff is increased regressivity (OBBBA + high tariffs on most imported = more regressive federal revenues). The actual effects depend upon the rates, goods subject to tariffs, and how long they are maintained so behavioral responses settle down to the expected reaction (i.e., the tariffs are passed along to consumers).³

Because of the constant changes in tariff rules, it will be hard for economists to analyze the distributional effects with any precision. That won’t stop them from doing analyses, of course. See Figure 7 for the Yale Budget Lab’s shot. I’m sure TPC will do one sooner, rather than later, which will appear on the tracker page.

Thus, the main story may be about making the tax system more regressive or protecting the economic interests of elites. This book, Trade Wars are Class Wars (Yale U Press 2020), makes that point as a general matter. (Disclosure I have not read the book yet; see Noah Smith’s review for an intelligent summary and assessment).

I guess this is, in part, what right-wing populism is about or what one can expect when electing a billionaire with Trump’s values.

Growth effects

Nearly all taxes are growth inhibiting (exceptions: head and land taxes, both of which have severe political and administrative problems). Broad-based, low rate, and neutral taxes are the least so. By contrast, because they are imposed only on selective transactions, tariffs distort market allocations and tend to slow growth relative to the revenue raised.⁴ Imposing them at high and variable rates makes them worse on that score. From a growth perspective, to justify them one needs measurable benefits (national security to ensure a safe supply of crucial products, stimulating a key domestic industry, etc.). None of that has been done.

If OBBBA is growth enhancing (probably questionable), tariffs negate that. More likely, they’re both growth drags.

Price effects

An obvious key question is the extent to which tariffs push up consumer prices, rather than being absorbed by the foreign producers, importers, and US sellers of the tariffed goods. A couple organizations are attempting to track that:

The Digital Design Lab at the Harvard Business School has a price tracker that tracks daily changes in prices of some goods by category and country of origin. They update graphs and the data is downloadable. The data is somewhat limited because it comes from just four major retailers. But it gives a good impression of what’s going on and supports the conclusion that initially much of the burden of tariffs have been absorbed, rather shifted to consumers. However, inflation in imported goods is twice what it has been in pure domestic goods.
The Hamilton Project has a more general price tracker that uses BLS data (Figure 3) and tracks changes in prices by industry category and country.

Note: this was added 8/28/2025.

Export tax?

According to the NY Times:

Nvidia and Advanced Micro Devices are expected to pay the United States 15 percent of the money they take in from selling artificial intelligence chips to China, as part of a highly unusual financial agreement with the Trump administration.

The deal, which was described by three people familiar with the agreement who spoke anonymously because they didn’t have permission to discuss it publicly, comes a month after Nvidia received permission to sell a version of its artificial intelligence chips to China.

While the Trump administration publicly said a month ago that it was giving the green light to Nvidia to sell an A.I. chip called H20 to China, it did not actually issue the licenses making those sales possible.

On Wednesday, Jensen Huang, Nvidia’s chief executive, met with President Trump at the White House and agreed to give the federal government its 15 percent cut, essentially making the federal government a partner in Nvidia’s business in China, said the people familiar with the deal. The Commerce Department began granting licenses for A.I. chip sales two days later, these people said.

Article I, section 9, clause 5, of the Constitution provides:

No Tax or Duty shall be laid on Articles exported from any State.

It kinda looks like that is what is going on. But is it a tax or duty if the companies “voluntarily” agree to pay it (or at least they say they voluntarily agreed to pay it)? Does anyone have standing to challenge it?

It’s just one more instance documenting the character of the administration – it’s transactional nature, making much (if not everything) about money, treating constitutional provisions as something to work around, etc. On a positive note, it may reflect a recognition that the fisc needs more revenue, even though this is absolutely not the way to raise it.

Notes

Disclosure to subscribers: A second post was too long (>5k words) to email out. It’s just more of my archiving of thoughts and sources. ↩︎
Extrapolating from the last month or so, the increase in collections would be about $350 billion per year. If it were maintained for 10 years, that would materially reduce the revenue loss from OBBBA. As expressed in the text, I am highly skeptical that the rate of increase for July 5^th through August 9^th can be maintained for a decade. That is so, even though Trump has announced or is promising even higher tariffs will be imposed. ↩︎
A lot of people have been surprised how little the tariffs have shown up in the price indexes. This is explained by many factors – businesses stocking up in anticipation (Penn Wharton estimates that this reduced tariff revenues by $6.5 billion), both foreign and domestic businesses absorbing the costs to retain customers (WSJ story), the lag in reporting price data, etc. ↩︎
This is what CFRB says about the growth effects: “Current and recent tariffs have been estimated to reduce expected output by 0.4 to 1.1 percent, which in turn could reduce revenue. Based on CBO, these effects could shrink the deficit impact by roughly a tenth. Based on Yale Budget Lab and Tax Foundation, the primary deficit reduction could be 17 to 40 percent smaller.” ↩︎

Tags tariffs

tax administration

Long goodbye

Less than two months into his stint as commissioner of the IRS, Billy Long is out and heading to Iceland as its new ambassador (assuming the Senate confirms him, as it does virtually all of Trump’s appointments). Given that he was totally unqualified for the job, that seems like a good sign to me.

Here’s an excerpt from the NY Times article that broke the story:

Billy Long, the former auctioneer and Republican congressman who was confirmed less than two months ago as head of the Internal Revenue Service, has been abruptly removed from the post by President Trump, the administration disclosed on Friday.

Mr. Long, who had little background in tax policy beyond promoting a fraud-riddled tax credit, had clashed at times with Treasury Secretary Scott Bessent during his brief tenure, three people familiar with the decision said. He also made high-profile mistakes, at one point last month telling tax practitioners that the agency’s all-important filing season would start late next year, a statement that the I.R.S. later said was premature.

A gregarious and colorful personality, Mr. Long had tried to cultivate a connection with the depleted and demoralized I.R.S. work force. He visited I.R.S. locations around the country and repeatedly sent emails to all I.R.S. employees allowing them to leave work early on Friday afternoons.

“With this being Thursday before another FriYay, please enjoy a 70-minute early exit tomorrow. That way you’ll be rested for my 70th birthday on Monday!” Mr. Long wrote to staff on Thursday.

I suspect that somebody in the administration realized that with the depletion of the agency’s staff and the challenge of implementing the myriad tax changes under OBBBA, having someone competent in charge was critical. Trying to cultivate employee morale by giving blanket time off, when the agency is facing massive and critical workload is not a good look.

A disastrous (or just bad) 2026 filing season, major glitches in implementing OBBBA, or similar would all be bad heading into the midterms, to state the politically obvious.

He was on a very short lease, according to the story, which reports that Long told colleagues he needed Treasury Secretary Bessent’s approval for “everything he did at the I.R.S. * * *.”

I take this as a good sign. But that’s like celebrating that you can salvage the toy after spilling the contents of your box of Cracker Jacks on the dirty floor. The administration has done nearly everything possible to wreck the agency. Cashiering an incompetent leader is a baby step forward. I’ll withhold my judgment until they nominate a replacement and enact a budget for the agency. It may be that the submarine’s dive has leveled off but I wouldn’t get my hopes up.

Former commissioner Koskinen had a nice quote, understated but capturing the reality, in the Times story:

“It has to be a new American record for the shortest I.R.S. tenure [for a Senate-confirmed commissioner] in history,” he said. “Obviously, he had no background in tax and no background in management. You give him a 75,000-person agency in charge of the tax code, and it is a bit of a challenge.”

Tags IRS

books

Books I’ve Read Recently – Baptizing America

Post author By saltspeak
Post date August 7, 2025
No Comments on Books I’ve Read Recently – Baptizing America

Author and book

Brian Kaylor & Beau Underwood, Baptizing America How Mainline Protestants Help Build American Nationalism (Chalice Press 2024).

The authors are both ministers in mainline Protestant churches (the mainline flavor of Baptist and Disciples of Christ) and have written multiple books on Christianity and politics.

I was completely unfamiliar with them or the organization they are associated with, Word&Way, which the book’s blurb describes as media outlet focused on faith and politics.

Why I read it

My older brother, a retired Lutheran minister, lent me his copy and suggested I read it. That’s a prime reason for reading it. My interest in the recent (i.e., over the last 40+ years) involvement of evangelical Christian churches and organizations in politics and more recently (last decade or so) of the emergence of explicit Christian Nationalism were also factors.

Disclosure of my priors: I grew up in a deeply religious family (adjacent to if not evangelical) and remain a person of faith and a regular churchgoer in a mainline Protestant (ELCA Lutheran) church. My faith is a core element of my identity, although I’m not a proselytizing type. I am concerned about growing Christian Nationalism – loosely, in my view, using the power of government to promote a Christian ethos – and its effects on our politics and policy, as well as its inconsistency with my view of the core tenets of my Christian faith. One’s religious values should influence his/her involvement in the political sphere, voting, rhetoric, policy choices, etc. But IMO the church’s (or the mosque’s, temple’s, etc.) role should stick to matters of the spirit (the Kingdom of God in NT Biblical terms) and government policy should err on the side of avoiding favoring or fostering any or any flavor of religion. In terms of the crucial First Amendment balance between avoiding establishing religion or impinging on the free exercise of religion, I err on the side of avoiding establishment.¹

What I found interesting

The authors’ basic thesis is that mainline Protestants have been complicit in fostering the climate for Christian Nationalism. They have done this in (at least) three ways:

By using their institutions (churches and denominational organizations) and direct clergy involvement to support elements of American civic religion. This has taken many forms, such as the government adopting religious slogans like “In God We Trust and “Under God,” government prayer and so.
By incorporating patriotic elements in their worship, hymns, etc. and direct or indirect support for war efforts.
By involving or seeking to involve elected officials in religious matters (e.g., presenting Harry Truman with the first copy of the RSV translation of the Bible).

The book goes through and extensively documents how this has occurred over the years, starting in the 19th century or earlier (e.g., prayer to begin sessions of Congress dates to its beginning).

I found the book interesting and useful in providing historical details about how these civic religious elements of the federal government were adopted. I was unaware of much of the details of that history; the dynamics of their adoption is modestly revealing. Since mainline Protestantism was the dominant religious culture of America, its fingerprints were all over this stuff, not surprisingly. In many ways, this is predictable for an establishment institution, like mainline Protestantism, even though it is contrary to the two-kingdom theology of the New Testament.²

As a side note, the book made me aware of how heavily Christian Nationalists were involved in the January 6^th attack on the capitol. The authors make the point, which I take as likely true, that the January 6^th Committee explicitly downplayed this reality out of concerns (per Liz Cheney) of potentially alienating evangelical Republicans. I don’t think that’s a big deal.

What disappointed me

I enjoyed reading the book but thought the authors could have made the points that they made in half the length. Much of it seemed repetitive.

More substantively, I think the authors should have worked harder at linking how the blurring the lines of church and state by mainline Protestants (in what I would characterize as largely symbolic and fairly benign ways) contributed to the more pernicious forms many of us are now concerned about – e.g., promoting religious discrimination (e.g., Muslim travel ban), funding religious education, using government to promote a particular religious view, etc.

The book is premised (I think because they don’t say it directly) on the idea that strong separation of church and state is a basic American principle or norm. That is a popular current conception, I think, but less clear when you look at the early history. It’s useful to remember that the Puritans came to establish a theocratic society and other colonies had strong religious elements. Prohibitions on establishment of religion by their governments would have been alien to them. The religion clauses of the First Amendment were restrictions on the federal government.³ Some state governments during the early years of the republic had state endorsed churches etc. Separation of church and state at all levels of government grew as the country became more religiously diverse (i.e., the emigration of a substantial number of Roman Catholics). I think discussion of and recognition of this reality would provide useful context for authors’ narrative and basic theses.

SALT connection

My Take

This isn’t directly on the book’s topic, but I think an element of the politicization of evangelical Christians may be identitarian. Here’s a cryptic version of my thinking.

Specifically, MAGA populism is heavily driven by anti-elitism. America culture over the last 50 years has become increasing secular, especially among the highly educated. Part of that is the demise of religiousness (by former adherents of mainline Christianity and Catholicism, both of which have experienced large declines in worship attendance and active membership). Church membership and attendance is simply no longer a social norm, especially among the highly educated, upper classes, and so forth. Another part of equation is the rise and promotion of diversity in its various versions (race, religion, ethnicity, etc.), largely a result of the civil rights movement. Secularism, promotion of civil rights and diversity and so on all became marks of elitism. Evangelical Christians are heavily white and working class, the group that suffered the most obvious losses as a result (degradation of their white privilege, so to speak). That made them a natural target population for populist Republicanism. The effort to attract them began in earnest in the 1970s and has accelerated since. It was part of the Southern Strategy that converted the Solid Democratic South to being equally or more so solidly Republican.
As this was all occurring, especially over the last 15 years or so, worship attendance and traditional marks of observance by Christian evangelicals has also been declining. That makes me question how much they are motivated by promoting a theocracy. Their ready acceptance of Trump decision to leave abortion to the states (rather than pursuing a national ban) is one data point supporting this. Their acceptance of someone with Trump’s character is another.
Identifying as a Christian Nationalist (e.g., by elected Republicans like Josh Hawley) and promoting policy positions along those lines (anti-woke stuff) is simply a way of signaling I’m on the side of and identifying with a group that is heavily white, rural, and conservative. Hence, my hypothesis that it is heavily identitarian, more than driven by a quasi-theocratic agenda.

None of this makes it any less concerning, but it also probably means that a successful persuasion strategy does not involve appeals to varying interpretations of scripture. The movement has also, it is worth noting, split evangelic Christianity in some ways for those who wish to remain neutral politically. This is document extensively in Tim Alberta’s book, The Kingdom, the Power and the Glory, which is worth reading if you’re interested in these issues. David French in his NY Times column has also documented many these same issues.

In that context, I find this David French quote (from his NY Times column) very revealing about evangelicals and politics:

When you live in evangelical America (especially in the South), you experience the sheer power of its culture up close. It’s theologically tolerant and politically intolerant. You can believe many different things about matters as important as baptism, salvation and the role of women in your denomination.

But if you leave the Republican Party, much less publicly criticize Trump? Well, you’ll quickly find that political orthodoxy matters more than you could possibly imagine.

Notes

For those familiar with constitutional doctrine, I favor Felix Frankfurter’s view of the First Amendment, rather than that of the current SCOTUS majority. For example, the notion that failing to subsidize religious schools impinges on free exercise of religion because private secular schools are subsidized makes no sense to me. ↩︎
I would observe that the antebellum southern church with its Biblical justifications for slavery is an example of how malleable Christian theology can become under cultural and economic pressure. ↩︎
The 14th amendment ultimately was construed to incorporate those restrictions on states in the 20th century. ↩︎

Tags Christian Nationalism