The White House is examining a proposal by Sen. Rick Scott (R-Fla.) to cut taxes by the amount raised from the tariffs imposed on China, according to a senior official, as the Trump administration faces pressure to contain the economic damage from the global trade conflict.
President Trump has discussed the plan with aides, but details of how it would work remain unclear, said the official, who spoke on the condition of anonymity to discuss internal deliberations. The plan would require congressional approval, and its fate there is uncertain.
Scott first floated the idea in an interview on CNBC earlier this month. The United States has raised about $43 billion in import duties from the tariffs that have already gone into effect on China since Trump became president, according to Nicole Kaeding, vice president of policy promotion at National Taxpayers Union Foundation. The administration is set to impose additional tariffs on scores of consumer goods on Sep. 1 and Dec. 15.
The review of the plan comes as the Trump administration faces growing calls from Republican lawmakers and conservatives to mitigate the impact of the trade war with China amid concerns about an economic slowdown headed into the 2020 election.
“When we get back from recess, we should immediately start working on a plan to reduce taxes for middle-class families & workers by the amount the Treasury is collecting in tariffs,” Scott said on Twitter this month, adding he had a “great conversation” about the idea with Larry Kudlow, the president’s top economic adviser.
It’s not clear how such a cut would be structured. Scott is considering a few options, according to an aide to the senator who spoke on the condition of anonymity to discuss internal deliberations. Scott hopes to have a policy proposal ready within the next several weeks, the aide said, although the senator is currently focused on Hurricane Dorian, which is threatening his home state of Florida.
The administration has considered proposals to cut payroll taxes or index capital gains to inflation, a move that would reduce taxes paid by investors, although the president appeared to shoot down both of those ideas last week.
Trump, in a reversal from the day prior, said he was no longer considering a payroll tax cut because “we don’t need it” to help the economy. He also said indexing capital gains to inflation would be “elitist."
The president has downplayed the impact of the trade war and his tariffs but acknowledged for the first time earlier this month that they could be passed on to consumers and hurt the Christmas shopping season. Scott’s proposal similarly recognizes that the import duties are often passed on to the consumer in the form of higher prices, but he has also defended the administration’s efforts to force China to change its economic practices.
“We have got to do everything we can to take care of ourselves and get them to change,” Scott said on CNBC. “Anything we raise in tariffs, we should give back to the rank and public in tax reductions.”
But criticisms of Scott’s idea have emerged. Some budget experts argued that the simplest way for Trump to reduce taxes would be for him to seek a quick resolution to the trade war. Consumer spending has held up during the trade tensions, although business leaders are concerned about the next round of tariffs expected to go into effect this fall.
Households face up to an estimated $1,000 in additional costs annually from the tariffs, a research report from JPMorgan Chase found this month.
“A middle-class tax cut would be: Don’t impose the tariffs on China,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, which advocates lower deficits, last week. “That’d be an easy middle-class tax cut Trump doesn’t even need Congress for.”