New York City's Pied-à-Terre Tax: Mamdani's Heavy Foot on High-End Second Homes

If you own a multimillion-dollar apartment in New York City but don't live there full-time, prepare to pay for the "privilege." New York City's (NYC) new pied-à-terre tax imposes an additional tax on certain expensive residential properties that aren't their owners' primary homes. A recent appeals ruling has allowed the city to proceed with implementing the tax while the legal battle ensues. The targets may be wealthy enough to make the policy politically appealing, especially in this political climate of "eat the rich." But none of this answer the more important question: Is taxing pied-à-terres actually a good idea? 

At first glance, the pied-à-terre looks like just another property tax, except on high-end real estate. In the case of pied-à-terre, it asks the question of what is the primary residency of the property. A $10 million apartment in NYC, therefore, receives very different tax treatment based on whether the owner lives in NYC or another state. 

That distinction matters because it creates an incentive that doesn't exist with a regular property tax: change the property's status and you may change the tax bill. And this isn't a trivial surcharge. The NYC Comptroller's analysis estimates that the tax could increase the property tax burden on a $10-15 million home by 89 percent, and on a $25 million home by 261 percent. 

The NYC Comptroller shows how consequential the behavioral changes can also be. Once accounting for a behavioral change due to this incentive, the estimated revenue drops from $500 million per annum to as much as $340 million, or 34 percent. 

That should be a warning sign for those who thinks the pied-à-terre tax is a gold mine. The more a property tax depends on how taxpayers use, classify, or structure their property, the more opportunities it creates for behavior to change in response. 

France is a fine case study showing what happens when you do that. Since 2015, French municipalities in areas with housing shortages have been permitted to impose a purchase on the housing tax for second homes. A recent study in the Journal of Urban Economics found something interesting. While the French tax did raise revenue, there was also a substantial decline in properties categorized as second homes. 

This matters because the government incurred the administrative burden of distinguishing between the primary and secondary residences without necessarily getting the behavior it wanted in return. If the property de facto remains a second home, the tax has produced compliance costs and distorted the owner's decisions without putting another home the market. 

Even better, NYC has been down a similar path before. NYC eliminated a property-tax abatement for non primary residence in 2013, especially those worth more than $5 million. As a Tax Foundation study shows, nonresident ownership fell by 0.6 percent for every 1 percent increase in tax liability. The effect was half as large for properties worth less than 1 million than it was for properties worth more than $5 million. 

The average New Yorker might ask why they should care about rich people getting their second homes taxes. The answer is that the city does not merely tax these people. It benefits from having them here. Second-home owners pay taxes but consumer fewer public services than full-time residents. Their income and spending in New York can generate additional tax revenue, while their presence effectively spreads the cost of government across a larger tax base. This is why the Tax Foundation warns that the tax could backfire if it causes enough wealthy nonresidents to give up their second property altogether. 

The pied-à-terre tax is not simply about the rich. France and New York have already shown that taxpayers respond when government changes the incentives surrounding property ownership. Those responses aren't costless. Money spent restructuring ownership, changing how a property is classified, or making different investment decisions is money and resources diverted from other uses. 

Economists have long recognized that these avoidance, compliance, and substitution costs as real costs of taxation, not merely transfers from taxpayers to government. The average New Yorker may never see those costs on a tax bill, but they are still costs borne by the economy in which New Yorkers live.  

Mamdani has decided that distorting the housing market is an acceptable price for taxing people who are politically convenient to tax. But "Eat the Rich" is not a substitute for sound economic policy. New Yorkers deserve better. 

The Show-Me State Should Show That Zero Income Tax Can Work in Missouri

"Eliminate the state income tax" is one of those proposals that sounds like it fits libertarianism like a glove. Personally, I don't need much convincing that there are problems with taxing income. I wasn't exactly thrilled in 2013 when the federal income tax reached its 100th birthday. This brings us to current events. 

Tomorrow, the citizens of Missouri are voting on a ballot about whether to eliminate the state income tax. In concept, I like it. All things considered equal, I prefer a consumption tax over an income tax because it generally does lest discourage work, saving, investment, and entrepreneurship. The proposed amendment has stages to phase out the income tax while giving lawmakers a way to find ways to replace the lost revenue. However, my enthusiasm wanes when it collides with economic reality. 

The concern is not simply whether I think consumption taxes are better than income taxes. It is about what happens afterwards. State governments still have expenses, and the state income tax makes up about 69 percent of the state's discretionary revenue fund. Unless the state decides it is going to spend a whole lot less, it needs to make up that lost revenue somehow. The question is whether Missouri can generate enough consumption tax revenue without causing more problems. 

I asked a similar question last year when analyzing Mississippi's income tax elimination proposal, and noted that not every state is built the same. Florida can lean on tourism. Alaska has oil. Nevada has Las Vegas. Texas excels in energy production, has rapid population growth, and property taxes to help make up. 

Missouri certainly has a diverse economy, but what is its equivalent to Texas' energy sector or Florida's tourism sector? This doesn't mean that it is doomed to fail. But it also means that Missouri cannot copy other states and except the same results. I don't see an obvious revenue source replacing over $6 billion in revenue. Every dollar not collected through the income tax has to be replaced somehow, or not spent in the first place. That is the part where I think Missouri will have quite the uphill battle, and that is the part where I would like for them to show me how they would succeed. 

If that weren't enough, there is another challenge. Replacing income taxes with consumption taxes is not as simple as increasing the sales tax rate. Even organizations that generally favor shifting away from income taxes have warned about the difficult. 

The Tax Foundation recently examined this topic and found that replacing state income taxes is much more difficult than estimates suggest. The reason is that a realistic consumption tax base is narrower than advocates often assume. Taxing business inputs creates its own problems, which excluding them means that the tax rate may need to be substantially higher. 

The lesson is not that states should keep income taxes forever. The lesson is that tax reform requires careful design. A poorly structured consumption tax can create problems of its own. I hope Missouri succeeds in create a more economically efficient tax system because that is a goal worth pursuing. 

However, lowering or eliminating a tax is only one part of reform, much like I brought up with the Kansas tax cut experiment last decade. The state must ensure that the replacement system is sustainable, transparent, and does not create unintended consequences. So far, it has not done a good job to show me that.

Illinois Finds Yet Another Ineffective Way to Raise Revenue by Implementing a Social Media Tax

Illinois' spending problems are nothing new, but how the Illinois General Assembly handles it is. Earlier this month, Illinois passed a new social media tax to help fund its proposed $56 billion budget. Platforms with 100,000 to 500,000 "Illinois users" will have to pay $0.10 per user each month; platforms with 500,000 to 1 million "shall pay $40,000, plus $0.25 per month" per user; and platforms with over 1 million users will pay $165,000, plus $0.50 per user, each month on the number of users over 1 million. 

Aside from dealing with budgetary issues, some view this tax as paying "its fair share." Some might view this as a fair and just tax. In practice, this is a complex, legally fraught tax that will cause all sorts of headache. 

Let's start with the first problem, one addressed by the Tax Foundation: no one seems to know what exactly is being taxed. For starters, what is a user? Is a user a person or an account? If a person has multiple accounts on the same social media platform, does each account constitute a separate user, or is the person one user? 

Then there is the question of whether someone with accounts on multiple platforms is taxed separately. What about who constitutes as an Illinois user? What happens if you are visiting from outside of Illinois temporarily? And what constitutes an Illinois user from whom a platform collects data? When lawmakers cannot clearly explain what is being taxed, businesses cannot reliably comply and taxpayers cannot hold government accountable.

Traditionally, governments have imposed special taxes on products that they regard as socially undesirable. Cigarettes have long been subject to punitive taxes. More recently, politicians have advocated taxes on sugary drinks, unhealthy foods, and other products they believe people consume too much of.

Instead of taxing economic activity neutrally, Illinois has singled out a particular industry for unique taxation. The state is effectively saying that because social media companies are viewed as problematic, they should bear additional financial burdens.

This approach suffers from the same flaw that afflicts most sin taxes. It substitutes political judgments for sound tax policy. Whether one believes social media has positive or negative effects is beside the point. Tax systems should raise revenue in the least distortive manner possible. They should not be designed to reward favored industries and punish disfavored ones.

One of the most troubling aspects of the social media tax debate is how quickly constitutional concerns are dismissed. Many people dislike social media companies, but constitutional protections do not vanish simply because the target lacks public sympathy.

The First Amendment issue is particularly significant. Social media platforms have become central venues for political discussion, news dissemination, and public debate. When government imposes a special tax on a particular category of communications platform, courts may reasonably ask whether the state is burdening speech-related activity in a manner that raises constitutional concerns.

The tax also raises questions under the Commerce Clause. Social media companies serve users across state lines, and internet activity rarely respects geographic boundaries. If Illinois can impose a unique tax based on user activity within the state, other states may adopt competing systems that subject the same activity to multiple layers of taxation.

Illinois’ social media tax is not really about social media. It is about a state government that has become structurally dependent on finding new revenue sources to support an ever-expanding set of spending commitments.

The problem is not that Illinois lacks creativity in taxation. The problem is that it rarely shows restraint in spending. When budgets become tight, the solution is rarely reform or prioritization. Instead, lawmakers turn to new, narrowly targeted taxes that are politically easier to justify than broader fiscal discipline. Matters end up being even worse when the tax is poorly defined and designed.

That pattern has consequences. Targeted taxes on unpopular industries may be politically convenient, but they do little to address the underlying fiscal imbalance. Worse, they risk creating a tax system that is increasingly fragmented, unstable, and vulnerable to legal challenge.

Social media companies may be unpopular today, just as smoking, fatty foods, and sodas have been in other political moments. But fiscal policy built on shifting political fashions is not a substitute for structural reform. Illinois does not need more inventive taxes. It requires a serious conversation about the scale and scope of government itself.

It Would Be a Gas If Trump Took the Fast Lane and Eliminated the Gas Tax

Every few years, when gas prices get high enough to be politically dangerous, politicians "discover" the idea of a gas tax holiday. Senator John McCain proposed it in 2008, President Joe Biden in 2022, and now President Donald Trump this week. It is peculiar to have politicians tacitly admit that high taxes harm consumers, but I will set aside that irony. Nevertheless, it does set an uncomfortable question: If temporarily suspending the tax would help consumers, why should the tax exist in the first place?

After all, nobody proposes a hiatus from something that is harmless or helpful. The very existence of multiple calls for a gas tax holiday should give us good reason to pause. Much like emergency waivers of the Jones Act after natural disasters, gas tax holidays inadvertently expose the hidden costs of a policy that politicians generally insist is reasonable. 

Before delving into issues about the gas tax, it would be worth noting that the gas tax is 18.4 cents per gallon, which will not do that much to alleviate the average cost of a gallon, which is $4.50. Now let's get into the main issue of its regressive nature, meaning that it takes a larger share of income from lower-income households than from higher-income ones. That is hardly a surprise for a consumption tax tied to a necessity like transportation fuel. For many Americans, driving is a price of participating in the labor market. 

The burden is uneven because transportation is not evenly substitutable. Higher-income households are more likely to have flexible work arrangements, shorter commutes, and/or access to multiple modes of transportation. Conversely, lower-income households are more likely to rely on older vehicles, need to take longer commutes, and have jobs that require physical presence. Rural commuters similarly have constraints, whether with longer baseline distances or fewer substitutes for automobile travel. 

The broader economic problems with the gas tax are longstanding. I previously examined its inefficiencies in detail, including its distortion of transportation choices, weak alignment with actual road usage, and broader market-side effects. Much like the Cato Institute argues, this is why state governments should  meet their infrastructure needs instead of the federal government.

The recurring gas tax holiday debate implicitly admits that the tax is burdensome. The question should be what to replace the federal gas tax with. States could implement their own, especially since most roads are not federally owned. But greater fuel efficiency and higher prevalence of electric vehicles is making the gas tax more passé. There is the option of mile-based user fees, as well as a "quant" framework that accounts for usage. Regardless of what it is replaced with, one thing is for certain: it is difficult to call a gas tax "necessary infrastructure funding" when it regularly needs a vacation to survive public opinion. 

Trump's Tariff Exemptions Are Harmful Protectionism with More Holes than Swiss Cheese

Tariffs have been a staple of Trump's trade policy in both of his presidential terms. When politicians propose a tariff, they make it sound like this simple tax rate because they are presented as universally applied. However, reality intervenes in the form of political discretion. As recent research from the American Action Forum (AAF) shows, that discretion creates exemptions.

AAF found that the "Liberation" Day tariffs had an exemption rate of 38 percent. With the newer Section 122 tariffs, that rate went up to 60 percent. The wider exemptions under Section 122 reduced the effective tariff rate from 14 percent to 10 percent. 

You might be wondering why I think this is a bad thing. After all, tariffs are import taxes. If the effective tax rate is lower, you would think that is better for the economy. Think again! Cato Institute trade scholar Scott Lincicome details the hellish labyrinth that tariffs have become. Tariff rates do not vary only by product. They do so by country, by statutory authority, and how multiple tariff regimes interact. 

Because Trump is trying to use multiple statutory authorities to push his tariff agenda, he has increased the number of tariff regimes in the U.S. tariff code from 3 in 2017 to 17 in 2025. More to the point, the percent of imports being subject to a tariff went from 0.02 percent in 2016 to 49.2 percent in 2025.

This has made tariff compliance a legal and logistical challenge of Herculean proportions. Rates stack inconsistently, exemptions are applied unevenly, and the rules change frequently. Tariffs become a hidden tax because firms have to devote time, hire specialists, and navigate trade uncertainty. A Federal Reserve report last year estimated that the compliance costs are the equivalent of 1.4 to 2.5 percent ad valorem tariff. Given that 95 percent of tariffs on U.S. imports are paid by the everyday American consumer, guess who is ultimately paying the brunt of those compliance costs? 

But those costs are not distributed evenly. Large firms can afford trade lawyers, customs specialists, and representation in Washington to do the rent-seeking and earn the exemptions. Smaller firms generally cannot. The asymmetry creates a divide between those who can navigate the rules and those who cannot. What is even more amusing is that the exemptions are a tacit admission from the Trump administration that tariffs are too blunt and harmful. Plus, they undermine the administration's rationales for the tariffs, particularly the rationale about generating government revenue.

While advocated for as a simple, universal tax rate, tariffs are a complex behemoth that incurs additional costs to businesses. The irony is that a policy that is presented as being straightforward ends up being a convoluted, opaque system that benefits well-connected businesses while screwing over the American people the protectionists claimed to help. 

A Misguided Millionaire Tax Comes to Washington State

Governments love to talk about fair taxation. In the State of Washington, lawmakers decided to do something about having what they claimed was the second most regressive tax system in the country to deal with that perceived unfairness. In response, Governor Bob Ferguson signed into law a 9.9 percent excise tax on any income that exceeds over $1 million, which will take into effect in 2028. While the idea of fighting for the little guy while making sure people pay their "fair share" (whatever that means), the unintended consequences are exactly why this sort of tax is ill-advised. 

First, let's tackle the fairness argument. As the Left-leaning Institute for Taxation and Economic Policy (ITEP) points out, the bottom quintile pay 13.5 percent of their income to state and local taxes, as opposed to 4.1 percent for the Top 1 percent. However, that's an incomplete picture. About three quarters of those earning less than $25,000 do not pay federal income taxes. More to the point, as the Washington Policy Center details, the top earners pay way more in absolute dollars than everyone else (see below). 

And then there's the fact that this new tax will make Seattle have the highest de facto income tax rate in the country, which I can tell you will do nothing for tax competitiveness. The lack of a de jure income tax was one of the last few positive features of Washington's tax system. This will take away Washington's tax competitive edge. The Common Sense Foundation estimated that if 5 percent of the millionaires left Washington, it would mean a loss of 8,000 private sector jobs and a decline of personal income of $19 billion from 2028 to 2032. 

Similar to the U.S. federal government, Washington State does not have a revenue problem: it has a spending problem. Washington State passed $9 billion in tax hikes last year, which is the largest in the state's history. The state still managed to create a $2.3 billion deficit that it needs to solve this year. And the proponents wanted to pass this millionaire tax to fund even more money on education, healthcare, and other government services? 

Washington's millionaire tax is an exercise of what it looks like to have an obsessive, singular, narrow focus on "fairness" without looking at the bigger picture. The top earners already contribute more. Yet this risks driving away high earners, deterring businesses to move to Washington, shrink private-sector jobs, and slow economic growth. Rather than solve fiscal problems, this tax will further erode Washington's competitiveness while ignoring the fact that Washington continues to be a state that continues to spend more than it makes. Chasing fairness seems noble until you realize that ignoring the consequences is expensive. 

The Billionaire Blunder: Why Bernie Sanders' Wealth Tax Wouldn't Deliver

Every few years, the idea of a wealth tax resurfaces in American politics. The concept is simple enough. Instead of taxing income, the government would impose an annual tax on accumulated wealth, whether that is stocks, bonds, real estate, or other assets. Last week, Senators Bernie Sanders (I-VT) and Ro Khanna (D-CA) introduced legislation for a 5 percent wealth tax on the billionaires. Sanders claims that this tax could generate $4.4 trillion in tax revenue over the next decade, revenue that Sanders would like to use to pay for Medicaid expansion, affordable housing, and a $3,000 in direct payments to households.

The theme of a wealth tax is hardly a new topic here at Libertarian Jew. I first covered it in 2014 when economist Thomas Pikkety proposed a global wealth tax. I did so again in 2019 when Senator Elizabeth Warren (D-MA) proposed a wealth tax. While the details of the proposal can change from one to the next, the evidence consistently shows the problematic nature of the wealth tax. I will use my 2019 argument as the basis for my current argument and update the data as needed. 

Other countries have abandoned the wealth tax. In the 1990s, the number of OECD countries with a wealth tax peaked at 12 countries. Now, the figure is at four countries: Norway, Spain, Switzerland, and Colombia. Much of the remainder of this piece will get into the "why" of this decline.  

The wealth tax is difficult to valuate. As the OECD points out (p. 69), a difficulty with the wealth tax is figuring out assets are worth. Unlike income, which is recorded through transactions, wealth often consists of assets that lack clear market prices, such as family businesses, land, or valuable collections. Determining their value requires subjective appraisals that can be expensive, inconsistent, and easily contested. 

High elasticity. Another question is how sensitive wealthy people are to wealth taxes. This responsiveness to a tax increase or decrease, known in economics as elasticity, gets at how much an individual can tolerate a tax change. In the Spanish case study, tax filers' taxable wealth decreased by 42-51 percent. Similarly in Colombia, a 1 percent decrease in the wealth tax led to an immediate 2 percent increase in wealth for those near the threshold. In Scandinavian countries, a one-percentage point increase in the wealth tax led to a decrease of stocks by wealthy taxpayers by 2 percent. 

It is no mystery: people do not want to pay the wealth tax. People can use the legal system with tax avoidance, whether through moving taxes in tax-exempt accounts, underreporting wealth, inflating liabilities, or claiming deductions strategically. These are the types of responses with lower tax rates. Imagine what it would be like with a 5 percent wealth tax rate!

It is also worth noting that Sanders' rhetoric about "millionaires and billionaires" softened in recent years. He conveniently dropped the "millionaires" around the time he himself became a millionaire. I guess it is easy to champion taxing the rich as long as you get to redraw the definition of "rich" to leave yourself out. 

Rosy estimates and evasion rates. Economists Emmanuel Saez and Gabriel Zucman estimated that Sanders' wealth tax would generate $4.4 trillion in the next decade. They were the same economists that calculated the estimate for Elizabeth Warren in 2019. Warren's tax was at 2 percent for wealth between $50 million and $1 billion, and 3 percent for anything above. For Warren's version, the economists assumed a 15 percent tax evasion rate. What I find peculiar is that these economists assume a lower evasion rate with Sanders' version, even though it is a higher tax rate. 

Forget that one of the co-authors, Zucman, co-authored a paper showing that those in the 0.01 percent have a tax evasion rate upwards of 30 percent. Other tax experts are not buying it. As the Tax Foundation points out, if you assume an evasion rate closer to that paper that Zucman co-authored, Sanders' estimate would decline to $3.3 trillion over 10 years. Senior Fellow Kyle Pomerleau at the American Enterprise Institute is even less optimistic. Once factoring in behavioral responses, Pomerleau estimated that it would be $2.3 trillion over the next decade. 

Wealth tax does not generate that much revenue. The issue of unbridled optimism is not confined to these two economists that Sanders hired. Historical experience shows how little revenue wealth taxes truly generate. With Sanders' estimates, his annual average of $440 billion would be the equivalent of 1.4 percent of GDP, given that the most recent GDP figures had it at $31.10 trillion. 

Looking at historical data, it has been quite low. That was a conclusion of that lovely OECD report on wealth taxes (p. 18). The Tax Foundation was kind enough to gather the historical wealth tax data on the few countries that still have a wealth tax to show that with very few exceptions, the wealth tax revenue does not exceed 1 percent of GDP (see below). 

  

Conclusion. All of this adds up to a simple conclusion: wealth taxes are inherently tricky, easy to evade, and historically generate far less revenue than proponents claim. Sanders' proposal may sound ambitious, but experience teaches us that wealth taxes provoke capital flight, creative accounting, and behavioral shifts that shrink the tax base. Let's be real: taxing billionaires at 5 percent is less a sincere fiscal plan and more a social media stunt dressed up as economics.

Supreme Court Strikes Down Trump's Tariffs: Why SCOTUS Didn't Add $2.4T to the Debt

Last Friday, the U.S. Supreme Court (SCOTUS) announced a much-awaited decision. In a 6-3 ruling, SCOTUS declared that Trump's tariffs under the International Emergency Economic Power Act (IEEPA) are unconstitutional. I took this as a win not only for the separation of powers, but also for the economic wellbeing of the American people. Economic estimates calculated that these tariffs would have cost consumers billions of dollars, reduced GDP growth, and harmed net employment while doing little in the way of measurable benefits. In a previous piece, I also point out that it is not only economic modeling. History has shown these adverse economic effects to materialize as a result of tariffs. As I wrote earlier this month, these tariffs are even affecting U.S. national security. So yes, I am quite happy and relieved to see this SCOTUS ruling. 

Counting Revenue That Does Not Exist

Yet I noticed a couple of estimates that came out in response to the ruling, and they were both budgetary in nature. The first estimate is from the Wharton School of Business, which a leading business school in the U.S. Wharton estimates that unless replaced by another revenue source, future tariff revenues will fall by half. The second estimate is from the bipartisan Committee for a Responsible Federal Budget (CRFB). CRFB writes that "SCOTUS tariff ruling could add $2.4 trillion to the debt [over the next decade]." According to the CRFB, this ruling could raise the debt-to-GDP ratio from the baseline 120 percent to 125 percent. One of the reasons that this SCOTUS ruling matters is because the Trump administration presented the tariffs not only in terms of trade policy, but also as a source of government revenue. 

The Mirage of "Lost Revenue"

Since the administration touted the tariffs as a revenue source, the framing of "the SCOTUS ruling adds debt" is especially misleading. Tariff revenue under the likes of Section 232 or IEEPA are temporary, process-dependent, and potentially disruptive on an international level. Assuming that the tariffs would last indefinitely or that there would not be economic blowback is unrealistic. The SCOTUS ruling does not add to the debt. Pretending that future tariff revenue increases debt ignores the reality that the money has not arrived in the government's coffers. An absence of a tax increase is not the same thing as an increase in the debt. 

Tariffs only shift resources from consumers and businesses to the government temporarily. They do not magically create wealth out of thin air. Calling tariffs "revenue" distracts from the fact that tariffs are a tax. The government does not have first dibs on the gains from private economic activity. Baseline budgeting treats the tax revenue as a permanent fixture once enacted. As I argued last September, the economic and fiscal realities of tariffs made tariffs an unreliable revenue source, especially given the negative economic effects and the risk of retaliation. That disconnect between baseline budgeting and economic reality is why the claim that "SCOTUS ruling causes debt" rings hollow.

The Real Culprit: Congress' Credit Card

The baseline assumption is that Congress does nothing else, that the currently enacted laws are on auto-pilot. This brings us to what really causes debt. U.S. federal debt does not exist because SCOTUS declared Trump's IEEPA tariffs unconstitutional. It is because the government has consistently spent more money than it makes. That is an outcome of basic accounting. As the most recent Congressional Budget Office (CBO) Budget and Economic Outlook shows, the government is projected to create an average annual deficit of 6.1 percent from 2027 to 2036. Keep in mind that this is higher than the 1976-2025 average of 3.8 percent. The fact that the CBO projected before the tariff ruling that the debt-to-GDP ratio would be at 120 percent, a ratio that is higher than it was after WWII military spending, should make us pause and ask what the real issue is.

The Deficit Solution Congress Refuses to Touch

As I detailed in 2024, tax cuts from the Tax Cuts and Jobs Act did not cause the economy to implode. Similarly, the absence of tariffs did not cause the debt "to explode" because of the SCOTUS ruling. It simply exposes how the U.S. economy is becoming increasingly fragile due to Congress' inability to get its spending under control. Tariffs, tax cuts, or emergency powers will not fix that insatiable, profligate spending. If you actually care about government spending (and if you are a U.S. citizen, you certainly should because of how it will directly affect you) and want a smaller deficit, don't go begging for more government revenue. Tell Congress to stop buying things it cannot afford.

Property Tax Abolition Won’t Fly in Florida: A Pragmatic Call for Property Tax Reform

Across the United States, homeowners are feeling the squeeze not only in terms of housing costs, but also in terms of increasing property taxes. The National Mortgage Association pointed out that since 2019, the median American has experienced a property tax increase of 27.4 percent (Cotality). The state of Florida is not an exception to this trend. Major Florida cities, such as Tampa, Miami, and Jacksonville, have experienced above-average property tax rate increases. Florida Governor Ron DeSantis seized on the public frustration, leading him to propose abolishing the property tax last month. 

Why Economists Prefer the Property Tax

On some level, I can see why the property tax is preferred over other taxes. A paper from the Organisation for Economic Co-operation and Development (OECD) found that property taxes provide a more stable source of revenue relative to most other taxes (Blöchliger et al., 2015). Property tax is less sensitive to economic downturn because people still need property, regardless of the level of economic prosperity. In terms of distortion, the immobile nature of land can have some influence on homebuilding decisions (Arnott and Petrova, 2002), but is less distortive than the income or sales tax. Out of local tax sources, property tax is the least distortive. While property taxes can be moderately regressive, they are not as bad as sales taxes, excise taxes, or capped payroll taxes. 

Why Homeowners Despise It

I can also see why people despise the property tax. It is not only because about two-thirds of taxpayers believe that the property tax is too high (Harris/AP NORC). The property tax is a large, lump-sum payment that is more visible than the sales tax. Because of the opaque assessment system to determine the property tax amount, taxpayers feel like they have little over a system that seems quite arbitrary. For DeSantis, he views property taxes as oppressive and ineffective, which is why he wants to eliminate them. 

The Libertarian Dilemma

From a libertarian lens, property tax can be viewed as a violation of private ownership because property taxes are a partial seizure of the property one owns. Property tax is like perpetually paying rent to the government. I understand a libertarian impulse to want to eliminate it because it would mean less coercion and more freedom. Upon further examination, abolition is not a viable option because property tax is embedded into local government finance. 

Fiscal Reality Check

The Right-leaning, pro-free-market Tax Foundation released a piece called There's No Good Way to Pay for Property Tax Repeal last month. The first point of consideration is that property taxes account for 70 percent of all local tax revenue. One of the reasons why DeSantis' plan is problematic that he does not have an answer to how he would replace that tax revenue. This gets at the heart of the issue: which tax would replace the property tax? It is not as if the idea of abolishing a tax is unprecedented. There were multiple countries that eliminated the wealth tax because it was so ineffective, yet there are no examples of property tax abolition. We can take a look at why. 

Income tax is collected at the state level. Aside from being a more distortive tax than property tax, relying on income tax revenue would make local governments more dependent on state government. Greater reliance on the state government risks having less liberty, not more. Plus, the Florida state constitution prohibits a state income tax.

What about the sales tax? The sales tax is subject to volatility, whether seasonal cycles, economic cycles, or disasters, such as hurricane season in Florida. Texas was considering the idea of abolishing the property tax. To do so, the Texas Taxpayers and Research Association calculated that replacing all the property tax would require a sales tax of 19 percent, which would be an approximate increase of 11 percentage points. Even when Idaho reduced property tax, it was offset by a sales tax increase. For Florida to replace property tax revenue, the Florida Policy Institute estimates that Florida would need $50 billion. 

Local government does not have many other tax levers aside from the property tax. Whether it is sales, income, excise, or corporate tax, that would in most cases come from the state level. Taking away property tax would make local government more dependent on state government. A reason why property tax abolition has not happened at scale is because no feasible replacement maintains fiscal balance and local autonomy. 

If Florida were to abolish the property tax, cities and counties across the state would face a multi-billion dollar gap. It would either require a collapse of local government or local government would lose autonomy to the Florida state government. Would Florida honestly be more free with fiscal collapse or if local governments decide to rely on more regressive forms of taxation? Property tax abolition would likely increase coercion because local choice would disappear, state bureaucracy would grow, and taxation would become less transparent. 

A Libertarian Case for Reform, Not Abolition

Property tax is the structural foundation that keeps local government going. They fund schools, police departments, roads, and local services. A pragmatic libertarian approach is not to fantasize about abolition, but rather reform tax policy. The James Madison Institute (JMI), which is Florida's conservative/free-market think tank, takes this approach. JMI views the property tax as increasingly burdensome, but stops short of abolition. A few suggestions that JMI provides include homestead exemptions, appraisal caps, levy caps, sales tax swaps, and gradual elimination of school-property tax millages. Other structural reforms, including assessment reform, zoning modernization, and spending caps, would help make the property tax reform options more lasting. With firm spending restrictions, property taxes and limited government can co-exist. But the way for that co-existence to occur needs to be with arithmetic and solid reform ideas, not alchemy or wishful thinking. 

Trump's Tariff Mirage: His Tax Plan to Replace Income Tax With Tariffs Does Not Add Up

President Trump is clearly not happy with the way his legal case for the "Liberation Day" tariffs is going. Yesterday, Trump said that losing this legal battle would "cause the U.S. to suffer greatly" and that "our country has a chance to be unbelievably rich again [with the tariffs]." This pattern of rhetoric glorifying tariffs is nothing new. Earlier this week, he opined that removing tariffs, what should simply be referred to as import taxes because that is what tariffs are, would turn the United States into a third-world country. Let us forget for a moment that the United States has been a developed country for decades without the high tariff rates that Trump is trying to implement. In April, Trump said that tariff revenue could be so great that it could replace the federal income tax. The problem with that assertion is that it does not make economic sense nor would it make America great again. 

Economic Logic Problem

First, as I pointed out in April, the rationales used by Trump for tariffs do not make sense. Trump both wants to protect American workers from "unfair foreign protection" and generate tax revenue. Either tariffs will be high enough to deter imports from coming in, or they will generate enough revenue to make America rich again. These goals are in tension with one another, and maximizing one goal comes at the expense of the other. Trump wants to have his protectionist cake and eat it too, but that is not how tariffs work. 

Revenue Realities

Even setting aside these contradictions, the math to replace the federal income tax with tariffs simply does not add up. With the current tariffs in play, the Congressional Budget Office (CBO) estimated last month that the tariffs would generate $3.3 trillion in revenue over the next decade. Contrast this to the CBO's January 2025 federal income tax estimate (which was made before the tariffs were enacted) over the same period, which is $36.9 trillion (see below). That is a difference of $33.6 trillion, or put differently, the tariff revenue is projected to be less than 10 percent of the income tax revenue. The gap in revenue levels makes replacement impossible. So why is it that tariffs bring in so much less revenue than the federal income tax? 

Historical Perspective

As the Tax Foundation reminds us, the federal government of the late 19th century and early 20th century, which Trump is romanticizing, was different from today's government. Back in the day, federal government spending was about 2 percent of total GDP. Thanks to the implementation of the federal income tax, the government's ability to collect revenue expanded, in no small part to its large tax base. Now, the government spends the equivalent of 22.7 percent of GDP. Tariff revenue could not pay for Medicare, Medicaid, or Social Security, never mind the rest of government spending.  

Why Tariffs Are More Harmful Than the Income Tax

Since the tax base of imports is smaller, the economic harm per unit of trade is higher. This means that raising meaningful revenue means tariffs need to be high. This results in greater economic damage than a broad-based income tax because tariffs tend to distort product and supply chain markets more directly than income taxes, which more often than not influence individual decisions cut as work and savings.

Tariffs affect what to buy, where to buy it from, and how to produce it. They are distortive because they only affect imports, as opposed to all goods. It is more distortive in part because goods from different countries get imposed with different tariff rates. With tariffs, it might cause consumers to buy overpriced domestic goods or force businesses to redesign supply chains inefficiently. As a result of shifting domestic production to less efficient domestic industries, this misallocation harms overall economic efficiency. 

Furthermore, tariffs also hit lower-income households harder because they spend a larger share of their income on goods. To make matters worse, tariffs are systematically higher on lower-end versions of goods (about an average of 4 percent) than their high-end counterparts (Acosta and Cox, 2024), which hits low-income households even harder.  

As I explained last year, free trade is beneficial to the poor because it reduces their cost of living while increasing the price of what they sell. Since tariffs make the economy less free, Trump's tariffs will have the opposite effect on cost of living, as we have seen in the past. Additionally, the Peterson Institute for International Economics (PIIE) showed that a revenue-neutral swap of $780 billion in tariffs for income tax cuts would cause significant losses, including 8.5 percent of after-tax income for the bottom quintile. 

Global Implications

Unlike the income tax, tariffs invite the possibility for other countries to retaliate with their own taxes. Not only does this hurt U.S. exporters, but it disrupts global supply chains and diminishes global trade diminishes, much like it did during the Great Depression. Those higher import costs could very well put upward pressure on prices, thereby risking stagflation. This would likely appreciate the dollar, which would worsen trade deficits and undermine international collaboration. Furthermore, if Trump continues imposing tariffs on the U.S.' allies, he risks alienating allies. This could push allies towards China, which would undermine stated national security goals while diminishing the U.S.' influence in the global economy, as well as in East Asia specifically.

Conclusion

Trump's proposal to have tariffs guide policy on government revenue is not only economically unsound but historically misguided.  When these tariffs were at their heyday in the 19th century, it resulted in lower economic productivity in terms of propping up inefficient enterprises, lower standard of living, and higher consumer prices. If Trump goes ahead with this inane idea, not only will he harm the economy, but he will anger the United States' allies while failing to generate enough revenue to replace the federal income tax. Tariffs are no substitute for a broad-based income tax. Reviving tariffs under the guise of making America great again might make for a catchy slogan on the campaign trail, but in practice, it would cause enough economic decline to send the U.S. economy back to the 19th century, and not in a good way. 

Trump's 1% Mistake: How a Remittance Tax Will Fuel the Immigration It Aims to Stop

Last month, President Trump signed the One Big Beautiful Bill Act (OBBBA), a budget reconciliation bill that had quite a bit in it considering it is over 1,100 pages long. As I mentioned shortly after the enactment, I would probably need to cover other provisions in the future and here we are. The Left-leaning outlet Vox brought one such provision to my attention: a one percent remittances tax. A remittances tax is an excise tax imposed on the non-commercial transfer of money that individuals send from one country to another. Remittances are most common for immigrants who send money to their families in their home country. 

Despite of what some might think, remitted dollars are not "lost" because the U.S.' global dominance means that the dollars return in the form of trade, investment, and dollar demand. Rather than disappear, remittances act more like temporary outflows. So why did the Republicans decide to tax remittances? In the Committee report's own words:  

The Committee believes that the ability of non-citizens and non-nationals of the United States to send payments to individuals in other countries through the system of remittance transfers may encourage illegal immigration and lead to the over reliance of some jurisdictions on the receipt of such remittance flows.

In short, the justification is curtailing illegal immigration. Some might argue that because it was initially proposed at 5 percent and eventually lowered to 1 percent, that somehow makes it better. Guess what? It really does not, and not simply because the 1 percent applies to all remittance senders, including U.S. citizens (although bank accounts and U.S.-issued credit cards and debit cards are exempt). This tax will have many ramifications both in the United States and the global economy. 

Taxes have two main functions: to generate revenue and to discourage behavior. First, let us take a look at the revenue. In the case of the remittances tax, the Joint Committee on Taxation (JCT) estimated that it would generate $10 billion in revenue over the next decade. The Center for Global Development (CGD) puts the estimate at an even lower $4 billion in revenue over that time period. Remittances taxes imposed in other countries offer little hope. An International Monetary Fund (IMF) study found that the other two nations that notably have a remittances a tax, Gabon and Palau, did so while generating a negligible enough amount of revenue where both countries scrapped the tax.

I am not too optimistic about the revenue estimates considering that the compliance costs will diminish actual revenue, including requirements for financial institutions to distinguish between taxable and exempt payment methods, maintain detailed transaction records, and manage refundable tax credits for eligible senders. The compliance will also violate data privacy since the financial institutions will have to collect and share such sensitive personal data such as citizenship status and payment method details. While it will hit low-income and immigrant communities most heavily, U.S. citizens may face privacy risks due to increased financial surveillance, documentation requirements for refunds, and potential misclassification or data exposure. 

What behavior does a remittance tax discourage? Sending money to other countries. This might sound like a win for the anti-immigration Republicans, but it will not be. Remittances outpace foreign direct investment and overseas development aid at a rate of 3 to 4 times. Destinations include such nations as Mexico, El Salvador, Guatemala, and India, which are among the top countries of origin for the undocumented workers that Trump does not want illegally entering the country. 

A study from the Center for European, Governance, and Economic Research found that a one percent increase in the cost of sending remittances translates into a 1.6 percent decrease in remittances sent (Martínez-Zarzoso et al., 2020). This is a big deal because remittances account for at least 3 percent of GDP for 78 countries (World Bank). The Center for Global Development used the aforementioned study along with bilateral remittances data from the World Bank to find that Mexico that stands to lose, at $1.55 billion annually. 

In terms of percentage of GNI, El Salvador, Honduras, Jamaica, and Guatemala will feel it the most (see below).

A one percent tax does not sound like a lot, but it translates into money that never reaches people in developing countries. For example, remittances in Mexico have helped pay for medical bills and support pensions and public services. With underdeveloped banking systems, cash is often how many in developing countries receive money. As the Overseas Development Institute brings up, remittances are effective because have a greater impact on poverty reduction because they directly reach a greater share of the population and more poor households, not to mention that the greater purchasing power results in greater economic utility. By curtailing funds that help people in developing countries that reduce poverty, cope with financial shocks, and weather natural disasters, life will become that much more unstable for people in these countries. The increased instability created as a result will incentivize citizens in developing countries to want to emigrate to the United States, which undermines Trump's stated goal of curtailing illegal immigration.

Then there is the matter of crime. Taxing remittances incentivizes sender to bypass regulated services providers and push their transactions into informal or underground channels, which like all underground markets, are less transparent and harder to monitor.  This shift makes it more difficult to trace illicit flows, thereby undermining national security and foreign policy interests. Because this will push immigrants to underground options, they will be exposed to greater fraud, theft, and organized crime exploitation.  

On top of all of this, this remittances tax has the hallmarks of inferior tax policy. It is a form of double taxation because migrants already pay an income tax to the host country. It is a regressive tax because remittances are most commonly sent to the poor families of migrants, thereby increasing the burden of poverty. This remittances tax is also non-neutral because it discourages an arrangement where a household is split between the United States and another country. This tax is targeted, inconsistent with an overall tax design for a country without a value-added tax (VAT). The targeted nature of this tax is hypocritical considering that the GOP is purportedly the party of family values and these remittances senders are trying to help their families in poverty-stricken parts of the world.

Ultimately, the remittances tax is not about controlling immigration. This misguided and counterproductive tax will weaken economies abroad, disrupt families, and burden law-abiding individuals with needless bureaucracy and privacy violations. It is a tax that raises little revenue, targets vulnerable communities, and increases government surveillance. This policy ends up depreciating the American values of opportunity and responsibility that made this country great. This tax will contribute to the global inequalities that fuel migration in the first place. Instead of deterring it, this tax will fuel the immigration at a considerable human and economic cost.

Liberation Day Tariffs? More Like Economic Captivity Threatening the U.S.' Economic Future

Since the beginning of his second term, President Trump has aggressively pursued tariffs. He implemented tariffs on Canada, China, and Mexico under the guise of the War on Drugs. There were the 25 percent tariffs on steel and aluminum, as well as the tariffs on automobiles and auto parts. Trump created more tariff turbulence with the so-called "reciprocal" tariffs. Announced on April 2 during what Trump labeled as "Liberation Day," these new tariffs entail a basic universal tariff of 10 percent along with additional tariffs ranging from 10 to 50 percent, depending on the country. Shortly after that announcement, I detailed how a) these tariffs are not truly reciprocal, but based on shoddy math; and b) Trump's rationale for these tariffs, the trade deficit, is baseless. 

Then in May, the U.S. Court of International Trade unanimously ruled that Trump's "Liberation" Day tariffs, along with tariffs adopted under the International Emergency Economic Powers Act of 1977 (e.g., the fentanyl-related tariffs), are unconstitutional. Unfortunately, the Supreme Court decided to not rule on the constitutionality of these tariffs before its last session was over. As such, a number of the country-specific "Liberation" Day tariffs (e.g., Brazil, Canada, India) went into effect last Thursday. The baseline 10 percent tariff from the "Liberation Day" announcement has been in effect since April 5. In 2023, I wrote a piece on what a universal 10 percent tariff would look like. Basically, it it is a regressive tax on U.S. consumers that will raise prices, strain supply chains, and particularly punish small businesses and ordinary households. But more on that in a moment. 

I already wrote about the fentanyl-related tariffs and the "Liberation" Day tariffs would have had a much greater impact on the economy, which is why I am focusing on those tariffs instead. The "Liberation" Day tariffs will constitute the largest tax increase as a percent of GDP since 1982 (Tax Foundation). The economic effects of these "Liberation Day" "reciprocal" tariffs had they been implemented cannot be overstated. Here are some estimates of economic impact from what these "Liberation Day" "reciprocal" tariffs would have cost (unless otherwise specified):

• American Action Forum: In April, the estimated cost to U.S. consumers and businesses was up to $371 billion a year. However, in August, AAF amended that estimate to over $400 billion, which is mainly due to the larger 30-percent tariff imposed on the European Union since the initial "Liberation Day" announcement. 
• JPMorgan: Last month, JPMorgan estimated that the effect of Trump's tariffs would increase the Personal Consumption Expenditures (PCE) index by 0.2-0.3 percentage points. This is to say that these tariffs will have inflationary effects, which will probably give the Federal Reserve pause in lowering interest rates. 
• Tax Foundation: An estimated $3.1 trillion over ten years ($310 per year), with the average household cost amounting to a $2,100 for the average household in 2025 alone.
• Wharton School of Business: Reduce GDP by 8 percent and wages by 7 percent. A middle-income household faces a $58,000 lifetime loss in earnings. These tariffs would be twice as distorting as increasing the corporate tax from 21 percent to 36 percent, which is impressive given how distorting corporate taxes are. 
• Yale University: In April, Yale's Budget Lab estimated the following effects of the "Liberation" Day tariffs: consumer prices to increase by 1.3 percent in the short-run; the average household would lose $2,100 in purchasing power; and a reduction U.S. GDP growth by 0.5 percentage points. 
• In its August update, the Budget Lab did not separate the "Liberation" Day tariffs. However, it confirms that with all the tariffs, the effective tariff rate will be 17.5 percent, which is the highest since 1935. This aggregate effect is estimated to translate into an average per household loss of $2,400 in purchasing power for the year 2025; a US GDP decline of 0.5 pp; and unemployment rising 0.3 percent (or a loss of 497,000 jobs). 

Keep in mind that these estimates are generally for the "reciprocal" tariffs alone.  When you compound these tariffs with the other tariffs, the overall effects of Trump's trade war are all the more glaring. As of August 1, the Tax Foundation's model puts its estimates of Trump's tariffs at a GDP reduction of 0.8 percent, a job reduction of 788,000 full-time equivalent (FTE), and capital stock decreasing by 0.7 percent. 

I want to point out something else that the American Enterprise Institute brought to my attention. A 0.8 percent GDP reduction might not sound like a lot at first. However, when you compare it to what the Congressional Budget Office projected long-term GDP to be before the "reciprocal" tariffs were in play (see below), it's a sizable reduction in GDP. 

The damage to the United States exceeds what think-tanks estimate or mainstream economic theory predict. We have seen this tariff terror before. During his first term, Trump's tariffs resulted in 166,000 fewer jobs, wages reduced by 0.14 percent, a GDP reduced by 0.21 percent, and an annual price tag of $51 billion. Even President Bush Jr.'s tariffs translated into 200,000 jobs lost and $4 billion in lost wages. 

Adding to this, the International Monetary Fund (IMF) analyzed tariffs across 151 countries from 1963 to 2014 (Furceri et al., 2019). Guess what the IMF found? "Tariff increases lead, in the medium term, to economically and statistically significant declines in domestic output and productivity. Tariff increases also result in more unemployment, higher inequality, and real exchange rate appreciation, but only small effects on the trade balance." That last bit about the trade balance is more important in these latest round of tariffs because trying to fix the trade balance is Trump's supposed justification for these farkakte "reciprocal" tariffs in the first place.

It would not have been surprising to see that these tariffs would have harmed investor and consumer confidence. History does not bode well for these sorts of tariffs. Back in 1930, President Herbert Hoover signed off on the Smoot-Hawley Tariff Act. Smoot-Hawley did not cause the Great Depression because the United States was already in an economic downturn at that point. But it sure made matters worse by turning a nascent recession into a full-blown depression (e.g., Mitchener et al., 2021).

Trump seems hellbent on playing Russian Roulette with repeating a history that no one ought to repeat. What Trump would have been "liberating" Americans from with his "Liberation" Day "reciprocal" tariffs is higher wages, cheaper goods, and a better quality of life.  These tariffs will make it more difficult for the everyday American to afford food, clothing, transportation, and household goods. American manufacturers will be walloped as well because they rely and parts and inputs from other countries. Those parts and inputs are about to get a whole lot more expensive with these tariffs. 

As I pointed out last October, Trump's tariffs do not help the working class or the struggling small business. It will benefit politically connected corporations and unions. Trump's "reciprocal" tariffs are so bad that economists, think tanks, and advocacy groups that have historically been in favor of tariffs think Trump is taking it too far. The United States should not have idiotic tariff policies because other countries do. No one can tax their way to prosperity, whether it is a wealth tax or a tariff. Maybe this time, the American people will learn this lesson the hard way.

Morocco's Jobless Trap: When High Taxes, Labor Laws, and Corruption Stifle Economic Opportunity

Morocco is a country with such vibrant cities as Fez and Tangier, a diverse geography, a rich culture, a wealth of historic sites, and has been featured in such films as Casablanca and Game of Thrones. Guess what else Morocco has? High unemployment. According to the Moroccan government's Haut Commissariat du Plan, Moroccan unemployment is at 13.3 percent, which is slightly below the 30-year high (see below).

Youth unemployment is even worse, reaching a 25-year high (see below). Sadly, the problem is nothing new. NPR complained about high Moroccan youth unemployment in 2012. So what is causing this increase in unemployment? Sure, there was the COVID pandemic, but unemployment in Morocco is higher now than it was during the pandemic. 

As the International Monetary Fund (IMF) illustrates in its Article IV Consultation report, Morocco has withstood five droughts in six years that have led to production shortfalls of 40 percent. This seems like it explains the problem: lower agricultural output. However, Morocco's agriculture sector contributes about 15 percent to Morocco's GDP. That is a higher percentage, especially considering that high-income countries only have 2 percent of their GDP in agriculture. 

I bring this up because as economies develop and mature, they become less dependent on their agricultural sector. Similar to this recent article from the Institute for Research in Economic and Fiscal Issues (IREF), I argue that Morocco's dependency on agriculture is a larger symptom of government largesse getting in the way of true economic development. 

Taxation. Morocco's corporate tax can reach as high as 35 percent. You can read my analyses on corporate tax here, here, and here as to why that rate is too high. The standard value-added tax (VAT) in Morocco is 20 percent, which is higher than the global VAT average of 15 percent. A high VAT is significant because it reduces disposable income and discourages spending. On top of that, the Moroccan tax system has a narrow tax base and is riddled with tax exemptions that make evasion and avoidance common (Moutii, 2025). 

Government Spending. The good news is that Morocco is working on fiscal consolidation (IMF, p. 10). The bad news is that Morocco's debt-to-GDP ratio is 70.9 percent, which is about 30 percentage points higher than the recommended limit that should not be exceeded on the long-term for developing countries. Whether the Moroccan government can maintain fiscal discipline will determine how much this becomes a factor and avoids heading towards a fiscal cliff similar to that of the United States.

Labor Law Rigidity. The Legatum Institute details in its case study on Morocco that the Moroccan labor market is characterized by a lack of inclusion of women and youth, slow job growth, and low quality of jobs (also read this 2025 World Bank report on boosting the business environment in Morocco). This lack of labor market flexibility is brought on by a quickly growing minimum wage and high overtime costs, regulations that cause redundancies in businesses, rigidity on temporary contracts, and stringent barriers on terminating the employment of workers, all of which contribute to the high cost of labor. Additionally, a skills mismatch and lack of workforce development exacerbate the labor law rigidity (ibid., p. 50).

Corruption. According to Transparency International (TI), Morocco's corruption is worse than the global average. Even worse, its TI Corruption Perceptions Index score has declined since 2018. As I pointed out last year, corruption erodes economic growth. This is due to the fact that corruption impacts business confidence and hinders investment, as is illustrated by over 16,000 enterprises collapsing in Morocco last year. 

Postscript. It is true that there were global challenges such as pandemic and drought. It is also true that Morocco's high unemployment rate is more structural in nature. Punitive corporate taxes, a high VAT rate, and rigid labor laws make it difficult to modernize and diversify the economy. A richness in culture, geography, or global visibility is not going to save Morocco. It is a policy paralysis that will keep employment rates stubbornly high until the Moroccan government removes the barriers to economic prosperity.

Making Tomatoes Expensive Again: How Trump's Tomato Tariffs Will Squeeze Your Wallet

From salsa and salads to ketchup and tomato sauce, tomatoes are one of the most consumed produce items in the United States. While tomatoes serve multiple culinary purposes, the U.S. tomato market is being threatened. In April, the Trump administration withdrew from a suspension agreement on fresh tomatoes from Mexico. 

With the termination of this agreement, the U.S. Department of Commerce is implementing an antidumping duty of 20.91 percent on tomato imports from Mexico that is to take effect today: July 14, 2025. DOC claims that the agreement failed to protect U.S. tomato farmers from the "unfairly priced Mexican imports." An anti-dumping duty is a type of tariff that only comes into play when there is evidence of "dumping." Dumping is when foreign companies sell goods at prices lower than what they sell for in their home market or below the cost of production. 

The U.S. government, in short, is unhappy that Mexico can and does sell tomatoes at a much lower price than U.S. farmers. As I have explained with tax policy and who pays their "fair share," it is amazing how much fairness is in the eye of the beholder. We will get into the fairness aspect in a moment. What is worth mentioning is that Mexico accounts for 90 percent of U.S. tomato imports and 61 percent of overall tomato consumption. Fruit imports account for 60 percent of the fruits consumed in the U.S., which is twice the share in comparison to what it was in the early 1980s.

What is even more undeniable is that these tariffs will increase the costs of tomatoes. Based on mainstream microeconomic theory, tariffs decrease the quantity of imports, thereby increasing prices. It is not mere economic theory. Trump's tariffs during his first term cost the average U.S. household $831 per year. Looking at the tomato market, it is no mystery why tomato prices will increase.

Mexico has a cost advantage due to lower labor costs, a longer growing season, and better climatic conditions for growing tomatoes. What the DOC does not want to recognize is that Mexico simply has a natural market relationship in which Mexican tomato farmers are better positioned to supply tomatoes than U.S. tomato farmers, especially in the winter. U.S. tomato farmers in Florida have had to plow their tomatoes because increased picking and packing costs render them unprofitable to pick. With Trump's onerous deportations on top of it, undocumented workers who would have otherwise picked the tomatoes are too scared to work, thereby increasing tomato costs further. 

The think-tank American Action Forum (AAF) estimates that these tariffs will increase the cost of tomatoes by 8 cents a pound, or about a 7 percent increase. That estimate assumes that the only cost will be U.S. consumers paying for the cost increase because a spoiler for Trump: the vast majority of the cost of his tariffs is passed on to everyday Americans. 

Due to consumer expectations and U.S. businesses wanting to avoid profit margin decay, the AAF's estimate in cost increase could increase to 15 cents, or an 11 percent increase in cost. Since Mexico accounts for 90 percent of U.S. tomato imports and 61 percent of overall tomato consumption, the United States will need to try to compensate for the shortfall in meeting demand. 

In order to do so, the United States would need anywhere between 42,000 to 250,000 additional acres dedicated to tomato production. This is upwards of six times the size of Washington, DC. However, given that the United States does not have that advantage, odds are that there will be fewer tomatoes to eat. Not only that, this will mean less economic output. A study from Texas A&M (Ribera et al., 2025) shows that Mexican tomato imports to the United States create over $8 billion in economic impact, an impact that supports approximately 47,000 jobs in the United States (see below).

Whether it is with steel, automobiles, or movies, Trump still fails to realize that tariffs are a classic instance of "cut off your nose to spite your face." Interest groups demand tariffs and they often win because the concentrated benefits are more visible than the dispersed costs on millions of consumers. 

Trump was quick to blame Biden during the presidential campaign about causing food inflation. Let there be no mistake: Biden's fiscal policy contributed to food inflation. In its supposed quest to pursue market "fairness," Trump is going to protect a few well-connected farmers. As a result, Trump will raise tomato prices for the everyday consumer while slashing economic output and destroying jobs. American consumers and Mexican farmers should not be punished simply because Mexican farmers are better at producing affordable tomatoes. Affordable tomatoes are now the latest casualty in Trump's trade war and tariff turmoil.