The cited reference below to Keen and Lockwood makes a vital point about dynamic revenue estimates, and one that applies to new tariffs as it does to a new VAT. Namely, increases in tax rates on sales (or import sales) must reduce the tax base of income and payroll taxes and thus reduce their revenue yield. If a higher sales price (or tax) did not reduce the amount sold, and therefore the amount of income earned by sellers and their employees, then economics would have nothing to say.
With tariffs, this is a classic case of "what is seen" (revenue from the tariffs) and "what is not seen" (revenue lost -- from much more important taxes-- due to reduced economic activity in tariff-related sectors of the economy).
"Economists Michael Keen and Ben Lockwood’s cross‑country work finds that the long‑run increase in total revenue associated with VAT adoption is about 2.4% of GDP in one specification, implying that roughly two‑thirds of the VAT’s gross revenue comes at the expense of other taxes, and about 4.5% of GDP in a later paper."
The cited reference below to Keen and Lockwood makes a vital point about dynamic revenue estimates, and one that applies to new tariffs as it does to a new VAT. Namely, increases in tax rates on sales (or import sales) must reduce the tax base of income and payroll taxes and thus reduce their revenue yield. If a higher sales price (or tax) did not reduce the amount sold, and therefore the amount of income earned by sellers and their employees, then economics would have nothing to say.
With tariffs, this is a classic case of "what is seen" (revenue from the tariffs) and "what is not seen" (revenue lost -- from much more important taxes-- due to reduced economic activity in tariff-related sectors of the economy).
"Economists Michael Keen and Ben Lockwood’s cross‑country work finds that the long‑run increase in total revenue associated with VAT adoption is about 2.4% of GDP in one specification, implying that roughly two‑thirds of the VAT’s gross revenue comes at the expense of other taxes, and about 4.5% of GDP in a later paper."