With “affordability” dominating the political landscape, President Trump has begun floating the idea of sending $2,000 stimulus checks to working class Americans.
First, there is the question of basic math. Assume that, as Trump has hinted, workers with incomes under $100,000 per year would be eligible for the rebate. There are roughly 150 million Americans who meet that criteria, making the cost of the rebates $300 billion. Even using the optimistic Trump administration estimates, tariffs will bring in some $217 billion in revenue by year’s end. That leaves a shortfall of at least $83 billion. Moreover, Trump has also promised to use those funds to subsidize farmers who have been hard hit by both the tariffs themselves and the trade retaliation they have sparked. And, he has also promised to use those funds to reduce the skyrocketing deficit. This pretty clearly doesn’t add up.
Of course, this may become moot if the Supreme Court rules that Trump exceeded his authority in imposing several of his tariffs without congressional approval.But even if the Trump administration could make its fantasy math work, the rebates are unlikely to benefit many of those who need it most.
Tariffs heavily effect low-income Americans. As Matthew Klein showed, Trump’s tariffs are a tax equivalent to roughly two percent of national income and are heavily weighted towards goods such as food and produce, shoes, clothing, household goods, furniture and appliances, toys, and school supplies. These are goods that low-income people cannot easily go without or substitute. As Federal Reserve economist Miguel Acosta and University of Wisconsin’s Lydia Cox have shown, “tariffs are systematically higher on lower lower‐end versions of goods relative to their higher‐end counterparts.”
At the same time, many low-income Americans who pay higher tariff-induced costs may not be eligible for the rebates. In 2023, for example, 32 million American adults did not earn enough to file a federal tax return. Assuming that Trump’s rebates would be handled the same way as COVID stimulus payments, many of these individuals could be left out. In theory, the government could also use lists of those receiving federal benefits, but attempts to do so in the past have still missed millions of presumably eligible recipients. For instance, the 2018 and 2019 COVID payments left out as many as 12 million Americans who neither filed income taxes nor received federal benefits.
Ironically, the rebates may end up redistributing federal funds upward from those most in need.
At the same time, COVID stimulus payments were magnets for fraud, waste, and abuse. There is no reason to believe Trump’s tariff rebates would be any less so.
Rather than imposing taxes on consumers and then inefficiently attempting to help workers recoup part of those taxes, perhaps a better idea would be to simply allow Americans to keep their money in the first place.