Paul Ryan Says US Addicted to Tariff Revenue
Former House Speaker Paul Ryan, a Republican and self-proclaimed free trader, said the president should lose in the Supreme Court on his use of the International Emergency Economic Powers Act to impose tariffs.
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Ryan, who also chaired the committee with tax and trade jurisdiction during his congressional career, said that IEEPA was never meant to be used this way. "It’s a sanctions law not a tariffing law," he said.
Ryan, who spoke by video link for a Center for Strategic and International Studies podcast on Jan. 7, said that if the president loses at the high court, he expects the administration to work to replicate the current level of tariffs with other laws, like Section 232.
"It won’t be as clean and easy as IEEPA was. We’ve got a choppy, bumpy road ahead of us on trade."
Ryan, who served as speaker during Donald Trump's first term, said he argued about what trade deficits mean a lot with the administration during those years. He said in the case of China, it is a symptom of cheating, but for countries like Vietnam or the Philippines, "it’s really more of a proxy on living standards." He said that U.S. consumers want clothing that's affordable made in those sorts of countries, and the populations of those countries "aren’t rich enough to buy our high-end goods. There’s nothing wrong with that."
He said that Democrats always had a mercantilism strain because of unions, but now the philosophy that exports are everything and imports are a weakness has spread to his party. He said they see trade as "a zero sum game. I don’t think life is like that; trade is not like that. The reason people voluntarily trade with each other is because they both benefit from it."
Ryan said the better pivot after a Supreme Court loss would be to get Congress to pass a destination-based cash-flow tax. That was an idea during the tax cuts of the first Trump term, but it was difficult to sell to Republican members, Rep. David Schweikert, R-Ariz., has said (see 2411190048).
Ryan said a DBCFT taxes the trade deficit, because it taxes imports by businesses, gives a break on taxes for exports, and privileges domestic production by allowing firms to deduct the cost of wages.
He said both corporations and pass-through firms would be allowed to expense capital purchases immediately, and would pay a tax on cash flow, rather than the corporate income tax.
"It is effectively a consumption tax on businesses," he said. "It’s not a VAT but it looks like one."
He said it would bring in more revenue than the current tariffs.
Ryan also complained that Republicans have gotten too enmeshed with industry with equity stakes. He said while tax breaks are warranted for critical mineral processing and for chip manufacturing, politicians should trust that the American economy can thrive because of the rule of law, private property rights, its talented people, and deep and liquid capital markets. These advantages "beat central planning any day."