Next For Trump? Tariffs, Not Taxes
In the maneuvering over the big beautiful Trump tax cut three prominent sources of revenue were left on the table and remain to be used. It may turn out to be the big beautiful Bill part two (BBB 2.0).
- None of the close to a trillion dollars in revenue expected from the tariff increases Trump is pushing made it into the “big beautiful bill (BBB).” The tax cuts in the bill are entirely funded by conventional tax revenues, albeit with optimistic but also realistic expectations of increased revenues due to economic growth.
- Trump has instructed his Interior Department to proceed with massive sales of federal land, largely in Utah and Nevada. The revenue from these sales was not tapped in the BBB.
- Trump is making drug companies hold their prices for prescription meds to the lowest they charge in other countries. The cut will reduce Medicaid and Medicare costs substantially. Again, none of these savings are in the big beautiful bill (BBB).
So, because of the arcane rules that control how the Congressional Budget Office scores expected new revenues in budget bills, these three sources of revenue enhancement and spending reduction remain on the table and could potentially be used to finance a BBB part two.
On April 5, 2025, Trump invoked his authority under the International Emergency Economic Powers Act of 1977 (IEEPA) to address the national emergency posed by the large and persistent trade deficit to impose a universal ten percent tariff on all imports. With the US importing $40 billion a month the order will generate over $400 billion in federal revenues annually. And, with even higher tariffs pending in negotiations with China, Mexico, Canada, and the European Union, new revenues to the US could easily surpass $1 trillion.
The federal government owns 28 percent of the land in the country, valued at $1.8 trillion. While most of it is locked up in conservation areas like national parks and wilderness areas, a lot of it is just wilderness far from any heritage-protected land. Trump has already called for massive land sales in Utah and Nevada. None of this revenue is counted in the BBB.
These new revenues, combined with the expected reduction in drug costs for the Medicare and Medicaid programs will throw off billions not counted in the BBB.
Together these revenue sources open the door to a potential BBB 2.0 that could pay for steep cuts in federal personal and corporate income taxes.
But, given the tendency of the bureaucracy to spend new found money, it is vitally important to begin the planning on how to use this revenue windfall to cut taxes. Otherwise, it will be eaten up by the federal budget, never to be heard from again.
Trump originally imposed the new tariffs to force other countries to lower discriminatory trade barriers against American goods and services. Then his goal morphed to include creating incentives for companies to avoid the tariffs by moving their manufacturing to the US (called “onshoring”).
Now a new vista is opening up: Using the new revenues to fund massive cuts in federal taxes. For example, it may be possible to end federal income taxation on those earning less than $150,000 a year.
So far, the potential for such a tax cut have remained dreams but, as the new revenues materialize, Trump should begin concrete planning on how to use the money. Otherwise it may go the way of the post-Cold War peace dividend and just soak into the soil of growing federal spending.
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