President Donald Trump just admitted—though likely unintentionally—that recently enacted tariffs are taxes on Americans, with his proposal to send out “rebate” checks from tariff revenue. But rebating money to consumers acknowledges they’re the ones who paid in the first place.
A tariff on China doesn’t primarily represent a cost to Beijing. Its first-order effect is to cause Americans to pay more for Chinese imports. Trump floated the rebate idea as a benefit for those of a “certain income level,” but it amounts to something of a fiscal contraption. Money leaves people’s pockets through higher prices, tumbles its way through a bureaucratic Rube Goldberg machine, and some of it might get mailed back—minus administrative costs.
Rebating every consumer the precise amount that the tariffs increased their purchase prices wouldn’t make them whole, though. Inflationary effects, behavioral changes, and the demand that the consumer outlay the cost at checkout can’t be reversed by a check in the mail later.
Adding an income threshold to the rebate would only compound the distortion. Limiting payments to lower-income households might ameliorate some of the regressivity of tariffs. But even a perfectly designed rebate scheme can’t put the imported toothpaste back in the tube—the damage is done through inflated prices on everyday items.
To help working-class Americans, Washington should start by not taxing them at the checkout line and pretending it’s another country footing the bill.
—Andrew Leahey
Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed possible state disparities in conforming with the new federal tax package, the Oklahoma Supreme Court’s recent tribal taxation ruling, and more.
The Exchange—It’s where great ideas on tax and accounting intersect.
Insights
GOP Tax Bill Opens Investment Prospects for Opportunity Zones
Snell & Wilmer’s Marc Schultz says opportunity zone investors need to consider several factors when planning for benefits that take effect in 2027.
Supreme Court Kept Universal Service Boondoggle on Life Support
Solveig Singleton writes that Congress’ half-measures to regulate universal service mandated by the Telecommunications Act of 1996 aren’t enough to rein in the out-of-control tax-and-spend plan.
Energy Credit Transfers Will Stay Dynamic Under Trump Tax Law
Ryan LLC’s Ian Boccaccio and Dane Ware examine how the new tax megabill will affect the supply and demand side of the tax credit transferability market.
Oklahoma High Court Misfires on State Tax Authority Over Tribes
University of Montana law professor Pippa Browde says a court ruling that Oklahoma can tax the income of American Indians living and working on their tribes’ reservations bungles what should have been a straightforward case.
Expect State Disparities in Conforming With New Federal Tax Law
Anchin’s Alan Goldenberg says taxpayers should expect significant state policy shifts as lawmakers decide how the new $3.4 trillion federal tax package fits into their broader fiscal strategies.
Growing Tax Net for Digital Assets Demands Robust Legal Review
Andersen’s Zoe Wyatt and Dion Seymour explain transparency reforms that ensure crypto and digital finance no longer sit outside global tax data exchange networks.
Tax Bill Lets Family Businesses Focus on Wealth Transfer Headache
Capri Capital Partners’ Robert Mancuso writes that a cap on the estate tax is a boon for family businesses trying to plan for the $72 trillion Great Wealth Transfer over the next 20 years.
New Trump Tax Law Puts CPAs in Position of Learning as They Go
AICPA President and CEO Mark Koziel explains how tax professionals can help clients prioritize what changes need to happen now, next month, and next year as a result of the new federal tax-and-spending package.
Australia Signals Tighter Scrutiny of Arm’s-Length Conditions
Colin Biggers & Paisley’s Amy Liu says recent guidance from the Australian Taxation Office should encourage taxpayers to review their related party financing structures and prepare supporting documentation.
Columnist Corner
The net controlled foreign corporation tested income provision of the new tax and spending law “should prompt states to reassert control over their own tax policy and decouple their revenue systems from Washington’s ideological pendulum,” Andrew Leahey argues in his latest Technically Speaking column.
States legislatures should review their conformity statutes, as the NCTI is just the latest example of federal policy that could create legal challenges for states and work against their economic interests, Andrew says. Read More
News Roundup
IRS Leadership Shakeup Adds to Turmoil Among Slashed Workforce
The IRS has more holes in its senior leadership team and questions around morale of the remaining compliance workforce as two officials were put on administrative leave.
Book-Tax, Double-Dipping Rules Among Top Candidates for Rollback
Rules on the corporate book-income tax, the stock-buyback tax, and “double-dipping” of corporate losses are among the likeliest that the Treasury Department may seek to roll back or revamp as part of its deregulatory push, tax practitioners and other observers say.
IRS Chief Says Direct File Is ‘Gone,’ Other Audit Tech Is Coming
The Biden-era IRS free filing tool, Direct File, is “gone,” IRS Commissioner Billy Long said.
Peacock Attacks Last Minute Bulletin at Maryland Ad Tax Trial
A bulletin defining terms in Maryland’s contentious digital advertising tax is a “thinly veiled attempt to get deference” at the eleventh hour,
Tax Management International Journal
What is the African Landscape for Transfer Pricing Audits?
KPMG practitioners discuss the transfer pricing audit process in Nigeria and South Africa.
Cyprus Enforces Tax Rules on Low-Tax, Blacklisted Jurisdictions
STI Taxand practitioner analyzes Cyprus’ new defensive tax measures targeting transactions with low-tax and blacklisted jurisdictions, requiring businesses to urgently assess their holding, financing, and IP structures to avoid increased taxes and penalties.
Career Moves
Former IRS Acting Commissioner Douglas O’Donnell Joins KPMG
Douglas O’Donnell, who served as acting IRS commissioner amid the Trump administration transition, is joining accounting giant KPMG LLP.
Flaster Greenberg Adds Caro to Tax, Trusts and Estates Practice
Robert D. Caro has joined Flaster Greenberg’s business and corporate law department and its tax and trusts and estates practice groups.
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