The Growing Burden of the 'Trump Tax'
It’s time to start talking about the “Trump tax.” That’s the potential added cost to business and the U.S. economy imposed by President Donald Trump’s policies and behavior. You may still believe that this cost is more than outweighed by the reductions in taxes and regulation that are likely under a Republican president and Republican-controlled Congress. But it’s not nothing.
The Trump tax has two main elements. One is straightforward and intentional: Trump promised to raise barriers to immigration and trade, and now he’s doing it. Last week the president reiterated that he’s serious about building a wall along the border with Mexico, and his press secretary said a 20 percent tax on imports might be used to pay for it. On Friday came the temporary ban on U.S. visits for citizens of seven Muslim-majority countries. Next up: possibly an executive order targeting the H-1B visas heavily used by tech companies to bring in talented workers from overseas.
There are reasonable arguments for shifting U.S. immigration and trade policies in a more restrictive direction. But in general, more restrictive policies equal higher costs for businesses. They amount to a tax. And as my Bloomberg View colleague Matt Levine wrote today, imposing these more restrictive policies is by all appearances a much higher priority for Trump than, you know, reducing actual taxes.
The other element of the Trump tax is how the president goes about doing things. There was some feeling -- as Trump was appointing seemingly reasonable, competent businessmen such as Gary Cohn, Steve Mnuchin, Wilbur Ross and Rex Tillerson to key posts -- that the new administration might be a smoothly running, businesslike machine. And who knows? Maybe after all those guys have been confirmed and had time to put their stamp on things, it will be.
I wouldn’t count on it, though! What we’ve seen so far from the Trump administration is the same combative, easily distracted, attention-obsessed boss that we all got to know during the campaign, plus a few conflict-seeking aides who now have the power to upend immigration policy over a weekend by getting the president to sign off on a hastily conceived executive order. It’s been the most chaotic, conflict-filled start for any administration in memory.
There are those who believe the chaos is the deliberate laying of groundwork for an authoritarian coup, others who think it’s mostly bungling. I lean toward the latter view, but I really don’t know -- and that wide range of possibilities is telling. Businessmen complained a lot in the early years of the Barack Obama administration that political uncertainty was holding back investment and growth. Well, now they may learn what real political uncertainty looks like.
The key to Trump’s approach to politics is to keep people (the news media especially) talking about him all the time. That worked brilliantly in the presidential campaign. It may even succeed as a governing strategy, although the results so far aren’t impressive. What it means for business leaders is that the White House is likely to keep blindsiding them with actions and rhetoric that make their lives harder. That’s a kind of tax.
Again, the increased burdens imposed by this Trump tax may be more than outweighed by actual decreases in taxes and regulation. And whatever the administration does, the economy may do just fine over the next few years anyway as the global financial crisis recedes further into memory. But make no mistake: The Trump tax is real, and it seems to be getting bigger every day.
Trump did sign an executive order today “requiring that for every new federal regulation implemented, two must be rescinded.” But that’s one of those pledges where we won’t know what it really means until the rubber hits the road.
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