As Stephen Miran, the head of Trump’s council of economic advisers, has suggested, this might be achieved by imposing a withholding tax on income generated by US assets, or by converting foreign holdings of US Treasuries into 100-year bonds.
Either or both are – effectively, even if not in law – default.
Jeebus.
This is smart economics.
https://medium.com/@mcnai002/the-sovereign-wealth-effect-americas-new-tool-for-rebalancing-the-global-trading-system-363176816035
TLDR
Taxing investorment can replace dumb tariffs by addressing the capital account imbalance. Foreigners get dollars so that they can invest them in US Treasuries or buy US goods and services. If investment becomes less attractive they will use them to buy US goods and services. Tariff won’t be needed.
That paper makes a lot of sense for the US. Sure, economists will hate it because it goes again their sacred Ricardian theory, but then so does the Chinese economy.
FDR defaulted on Treasuries before the war, for both US and foreign holders. But virtually no American knows about it nowadays and the world continued to turn.
Now if I could just get some withholding on the dividends from my mutual funds (I have the dividends set to reinvest since I don’t need the money yet), I could cut how much I have withheld from my wages.
So has America collapsed and devolved into a nightmarish wasteland roamed by cannibal biker gangs, vampire cults, and razortoothed amphibious mutant goldfish due to Trump’s tariffs yet?
I was told there would be murderfish.
In English: taxation at source? Didn’t the UK abolish that 20 years ago as it was so fiddly and complicated? I remember bank statements saying something like “credit income has tax deducted”, at some point that stopped along with ignoring anything below a certain amount, so you’re not fiddling around with a tax return for 46p current acount interest. Makes sense, if you’re receiving a decent amount of credit interest, you’re doing a tax return anyway. And the bank doesn’t know what my tax allowances are, so if they deduct at source I’d have to do a tax return anyway to get it back again to correct it.
@jgh The plan is to move from a tax rate of zero to 2% say. Uncle Sam makes out like a bandit and forces Johnny foreigner to buy GM cars instead of T bills.