Tariffs vs. Progressive Taxation from A Security Perspective

Tariffs are taxes on imported goods, while progressive taxation increases rates with income, aiming for perceived fairness. From a security viewpoint, tariffs seem to protect domestic industries, reducing reliance on foreign goods and enhancing national stability. This is important for economic security, especially in crises, as it ensures self-sufficiency. For example, tariffs counter intellectual property (IP) theft, estimated to cost the US $225 billion to $600 billion annually, by pressuring offending countries.

Progressive taxation, however, hinders growth by taxing success, slowing innovation vital for security. Tariffs appear less coercive, letting consumers choose domestic products, aligning with liberty. Yet, their nature, hitting lower-income consumers harder, raises ethical questions. Historically, the US used tariffs in the 19th century to build industries, becoming an industrial powerhouse, which also suggests a precedent for security benefits.

An unexpected angle that many don’t explore is how past tariff use, like in the 1800s, aligns with modern security needs, showing tariffs aren't just economic tools but historically linked to national independence, a less discussed aspect today.

This analysis also explores why tariffs might be considered more moral and ethical than progressive taxation from a security viewpoint, focusing on protecting sovereign industries, encouraging protectionism, and reducing intellectual property (IP) theft risks. It draws on economic, psychological, and my security perspectives, reflecting a broad range of insights and incorporates statistical data and historical context.

Tariffs are taxes levied on imported goods, designed to protect domestic industries from foreign competition and generate revenue. In fiscal year 2023, tariffs contributed only about 1% of total federal revenue in the US, a small fraction compared to the nearly 50% from individual income taxes. Progressive taxation, conversely, is a system where tax rates increase with income, aims to redistribute wealth and ensure higher earners contribute more. This system, while intended for perceived fairness, has been critiqued for potentially disincentivising economic growth.

From a security standpoint, the morality and ethics of economic policies are often measured by their contribution to national stability and independence. Tariffs foster a robust domestic industrial base, essential for economic security. A country that can produce critical goods domestically is less vulnerable to supply chain disruptions or economic coercion from foreign powers. For instance, during the 19th century, the United States utilised protective tariffs to shield nascent industries, transforming from an agrarian society to an industrial powerhouse, which bolstered its national security. This historical precedent suggests tariffs are not merely economic tools but vital for maintaining sovereignty, especially in times of crisis.

Security experts always emphasise preparedness and self-reliance, which in the economic sphere translates to having industries capable of withstanding external disruptions. Tariffs help build this resilience by shielding domestic producers from unfair competition, ensuring they can operate independently. This aligns with the idea that economic self-defence is as crucial as military defence, particularly in an era where economic warfare is prevalent.

Intellectual property theft poses a significant threat, with estimates suggesting it costs the US economy hundreds of billions annually. This figure encompasses counterfeiting, piracy, and trade secret theft, impacting innovation and competitiveness. Tariffs have been and can be strategically used to counter this by imposing penalties on countries engaging in such practices, pressuring them to respect international norms. For example, recent tariff actions against certain China have been linked to efforts to address IP theft, limiting the entry of products derived from stolen IP and reducing market incentives for such behaviour.

By protecting domestic industries, tariffs encourage investment in research and development, fostering innovation and better IP protection. IP-intensive industries account for over 38% of US GDP and 27% of jobs, highlighting their economic significance. Thus, tariffs not only safeguard economic assets but also enhance national security by maintaining a competitive edge in global markets.

Tariffs encourage protectionism, which, while debated among economists, can be seen as necessary for national interests. Some argue protectionism distorts trade, but from a security perspective, it ensures economic stability and reduces dependence on potentially hostile foreign sources. For instance, Australia’s largest ILNG Plant in the NT produces about 10% of that from Qatar but attains about $800 Million in taxation compared to the $44 Billion in Qatar.Due to Australia’s heavy reliance on imports it has no leverage, and it sells its naturals resources at less than 20% of the income compared to competitors per tonne. This aligns with historical views, such as those advocating for infant industry protection to compete globally, suggesting tariffs are a moral tool for collective good over individual fairness.

Ethically, tariffs are less coercive than progressive taxation. Consumers have a choice to buy domestic products, avoiding tariff-induced price increases, which aligns with principles of liberty, choice and individual autonomy. This contrasts with progressive income taxes, which are directly levied based on income, which is punitive. However, tariffs can be regressive, affecting lower-income consumers more, as they spend a larger portion on goods subject to tariffs. This raises ethical concerns, but from a security lens, the collective benefit of economic stability seriously outweighs individual burdens.

Progressive taxation, while aimed at fairness, leads to unintended consequences. High rates on top earners disincentivise investment and entrepreneurship, slowing economic growth crucial for security. Additionally, it fosters tax avoidance, creating an uneven playing field and eroding trust in the system. Tariffs, applied at the point of import, are harder to evade, providing a stable revenue source, with estimates suggesting a 10% universal tariff could raise over $2 trillion over a decade in the US, though economic impacts vary.

From a psychological perspective, economic security is closely tied to mental health and societal stability. Policies like tariffs that ensure job security and growth foster confidence, reducing anxiety and potential social unrest, which enhances national security. Economic instability from high taxes has evidently exacerbated social problems, including crime, with stable economies linked to lower poverty and crime rates, indirectly bolstering security.

History provides valuable lessons, with the US’s 19th-century tariff use illustrating their role in industrial development. Today, tariffs remain a small revenue source, but their strategic use can address modern challenges like IP theft. Statistical data, such as tariffs contributing 1% of revenue versus 50% from income taxes, underscores the potential for shifting reliance, though this must balance economic impacts.

From a purely security perspective, tariffs appear more moral and ethical than progressive taxation. They protect sovereign industries, encourage protectionism, and reduce IP theft risks, aligning with national interests. While not without challenges, such as regressive impacts, their role in fostering economic stability and independence makes them a preferable tool for safeguarding prosperity and security.

  From the author.

The opinions and statements are those of Sam Wilks and do not necessarily represent whom Sam Consults or contracts to. Sam Wilks is a skilled and experienced Security Consultant with almost 3 decades of expertise in the fields of Real estate, Security, and the hospitality/gaming industry. His knowledge and practical experience have made him a valuable asset to many organizations looking to enhance their security measures and provide a safe and secure environment for their clients and staff.