Following the Supreme Court’s tariff ruling a number of prominent Democrats including Illinois Gov. JB Pritzker are calling for refunds of the amount collected in the tariffs decreed by President Trump to consumers. I don’t think the Trump Administration should do so or the Supreme Court or Congress should determine that it should for three reasons.
The first reason is practical. There’s not actually any reliable way to calculate how much consumers paid in the now-known-to-be-illegal tariffs. Some of what some consumers paid in retail sales consisted of those tariffs. Some of the tariffs were paid by producers and not passed on to consumers. Some of the increases in prices were just that: increases in prices. Some of the tariffs were borne by importers and not passed on to retailers. If it could be determined what consumers purchased and if it could be determined how much of that was due to tariffs, then it might be doable. Simply refunding the amount collected by the federal government in tariffs might be politically attractive but it wouldn’t achieve the putative goal—refunding to consumers what they paid in tariffs.
The collected tariff revenue does not represent the economic burden borne by consumers. Refunding the collected amount would not match the distributed harm, because the harm was uneven, partially absorbed upstream, and partially embedded in price structures that no longer exist.
The second reason is justice. It wouldn’t be just to “refund” amounts to consumers that they didn’t actually pay. Critics seem to be conflating restitution to injured parties with disgorgement of unlawfully collected funds. They aren’t the same thing. Once the price system has adjusted, you cannot unwind it cleanly. Attempts to do so create new distortions.
The third reason is monetary. In a structurally deficit-financed federal system, large-scale refunds are overwhelmingly likely to be debt-financed. Debt-financed transfers increase aggregate demand without increasing output and therefore place upward pressure on prices.
You cannot unwind a tariff by writing checks after the price system has adjusted. You are not reversing a distortion; you are layering a new one on top of the existing structure. Consequently, my conclusion is that the amount shouldn’t be “refunded” at all. Although disgorgement of unlawfully collected government revenue is a well-established legal remedy and the government simply shouldn’t keep money it had no legal authority to collect, there is an alternative that would address the practical, moral, and monetary considerations identified above: use the money strictly to reduce the size of the deficit.
I agree that trying to refund consumers makes little sense. You likely double the money to do that with much of the money going to the wrong people. However, I bet corporations have decent tax records (many anticipated this) so that you could refund them. It does feel like this being an illegal tax maybe someone should be made whole. However, it turns out that Lutnick’s kid(s) now run Cantor Fitzgerald and they have been buying up at a discount the rights to any refunds. It certainly seems wrong that one of the architects and chief advocates of an illegal tax should personally benefit from efforts to compensate those who had to pay the tax. Given that corporations largely passed on the costs I end up favoring no refunds rather than reward what may have been a grift all along.
Steve
The importers were forced to pay the tariffs, and the importers should be repaid. All other transactions were voluntary and at an agreed upon price.
Assuming downstream buyers receive money, should upstream sellers receive money? If foreign exporters lowered their cost, they should be reimbursed, as well.
Legally, only the importer is eligable for refunds. That’s usually not the final consumer.
I’m guessing there’s going to be some dissipointment when the refunds flow.
One thing that nobody has clarified is how this ruling works with many products (for example, anything that contains steel or aluminum) eligible for multiple tariffs. There’s a bunch of rules on which of the tariff rates took precedence and whether they “stacked” on each other.
In some cases, there were imports where the rule was pay the lower of the now illegal IEEPA tariff or the steel / aluminum tariff, etc. A recalculation with the IEEPA tariff removed would mean a higher tariff….
“However, it turns out that Lutnick’s kid(s) now run Cantor Fitzgerald and they have been buying up at a discount the rights to any refunds.“
Who created a security or other contractual obligation backed by these rights? How were they priced at issue? Were they offered to anyone?
My understanding is that there is a pre-existing refund process in place for the importers to apply for a refund. I noticed in passing that there were some efforts made by the Trump administration to make this more difficult (something about protest deadlines), but I didn’t follow it. Trump also sought legislation to issue $2,000 checks to Americans from the tariff pool which also appeared to be intended to bypass importer refunds. Did Pritzker support such legislation? Does he think Presidents have the power to spend money without legislative support? Should I be kinder and just understand that Pritzker’s name recognition among Democrats continues to lag and he is just like us needing a little attention from time to time.
To ask the question is to answer it.
No, he did not.
Unfortunately, politicians can’t resist the urge to redistribute other people’s money or use the its withholding to win votes and todays flame war/snark contest.
The cleanest solution would be for Congress to codify the tariffs for the period they were in effect. This would meet the constitutional requirement for Congress setting tariffs as well as resolve the entire refund quagmire. Will they do this? Of course not. Quagmire it is.