The Tariff Trust

The problem

Whatever one thinks of tariffs, the arithmetic of who pays them is settled. A duty is collected from the importer at the port and passed, in most of the studies that have looked, largely through to the price on the shelf. It is a consumption tax, and like every consumption tax it takes a larger share of a small income than of a large one. In fiscal 2025 the United States collected $195 billion in customs duties, about 250 percent of the fiscal 2024 total of roughly $77 billion, with monthly collections rising from $7 billion in January to $30 billion by September. The legality of part of it was still being argued in court as the year ended.

This catalog does not argue for or against the tariff. It has one position, which it applies to every public receipt: money the public pays for a public purpose should be visible to the public, and money that comes from a public asset should not be spent as if it were ordinary revenue. № 038 made the argument for carbon: a price on pollution is the cheapest way to cut it and the fastest way to lose an election, unless the money comes back as a cheque with the citizen's name on it. A tariff is the same instrument pointed at a different problem, and it has the same political shape. It raises prices now, for a benefit, if there is one, that arrives later and to someone else.

Today the $195 billion goes to the general fund. It reduced the deficit by that amount in 2025 and will do so again in 2026, and no citizen will ever see a line that says what it cost them or what it bought. If the tariffs are struck down, the refunds will go to the importers who paid them at the port, not to the households who paid them at the register. If they stand, they will be spent.

The proposal

The Tariff Trust: all customs duties collected above a fixed baseline, the fiscal 2024 level indexed to inflation, are placed in a trust. Half is returned to every citizen as an equal cheque on Dividend Day. Half is deposited in the American Permanent Fund as principal. The baseline continues to the general fund as before. The rule takes no position on the tariff. It takes a position on the money.

How it would work

1. The baseline. Customs duties at the fiscal 2024 level, about $77 billion indexed to inflation, continue to flow to the general fund, because the budget has relied on that amount for decades and the proposal is not a hole in it. Everything above the baseline is the trust's.

1. Half back, on the day. The first half of the excess is divided equally among all citizens and paid on Dividend Day under № 017. In fiscal 2025 the excess was about $118 billion; half of that, across roughly 340 million citizens, is about $175 a person. It is not a large sum, and a family of four receiving $700 in a year when its groceries and appliances cost more will know exactly what it is for. The cheque is the receipt.

1. Half kept, forever. The second half is deposited in the fund as principal under the rules of № 065, № 066 and № 067. A tariff that lasts five years at 2025 levels deposits about $300 billion; one that is repealed next year deposits what it collected and stops. Either way the country keeps something from a tax it paid.

1. Citizens only, as always. The cheque goes to citizens, on the registry № 001 creates and № 051 documents. The tariff is paid by everyone who buys anything; the rebate, like every payment in this catalog, follows the line between member and guest, and the guest's share is the price of the door.

1. Refunds, if the courts strike a tariff. Where a duty is held unlawful and refunded, the refund comes first from the trust's undistributed balance, then from the general fund, and the deposited principal is not clawed back. Money already in the fund belongs to the citizens; the government that collected it unlawfully owes the importer, not the fund.

1. On the report. Each year's collection, the baseline, the excess, the cheque per citizen and the deposit appear on № 050's Shareholder's Report. Whether tariffs are good policy will be argued forever. What they cost, and what they returned, will no longer be.

The numbers

Fiscal 2025. $195 billion collected; $77 billion baseline; $118 billion excess; $59 billion returned as cheques of about $175 per citizen; $59 billion deposited as principal. At the fund's index return, that single year's deposit is worth about $120 billion in fifteen years.

What the cheque is against. Estimates of the cost of the 2025 tariffs to the average household range from several hundred to a few thousand dollars a year depending on the assumptions. A $175 rebate per person does not make a household whole. It makes the transaction visible, and it makes the household better off than under the current arrangement, in which it receives nothing.

What the trust does to the deficit. The same as № 068's rule: it raises the deficit by the amount of the excess, because the general fund would otherwise have kept it. The proposal is honest that this is a cost and that the reader who weighs the deficit most heavily will not like it. The reply is that a tax the government did not have last year and may not have next year is the wrong thing to build a budget on, and the right thing to build a fund on.

The honest objections

"This launders a bad tax by making it look like a dividend." The rule pays the same cheque whether the tariff is good or bad, and it makes the tariff's cost visible in a way the general fund never will. A voter who receives $175 and paid $800 in higher prices has, for the first time, a number to be angry about. A rebate does not make a tariff good. It makes it accountable.

"Half the money should go to the workers and industries the tariff was meant to protect." If the tariff protects an industry, the industry is protected by the tariff; it does not also need the revenue. Sending the revenue to particular firms turns a tax into a subsidy chosen in private. The equal cheque is the only distribution that cannot be lobbied for.

"Tariff revenue is too volatile to build anything on." Which is why the general fund should not be building a budget on it, and why the fund is the right home: principal deposited in a volatile year is still principal in a quiet one. The trust takes whatever comes and stops when it stops.

"Foreign governments will retaliate, and the retaliation costs American exporters more than any rebate." Possibly true, and outside the scope of this rule, which governs the money once collected and not the decision to collect it. A reader who opposes the tariff on those grounds should oppose the tariff. They should still want the money it raises, while it lasts, to go somewhere other than nowhere.

"Refunding importers when a tariff is struck down while keeping the principal is having it both ways." The importer is owed by the government that took the money unlawfully; the fund is owed by nobody and holds what it was given. Item 5 pays the importer first from the trust's undistributed balance, which is where the money is. The principal already deposited belongs to 340 million people, and a court ordering it returned would be ordering the citizens to refund a tax they paid.

Sources

• U.S. Department of the Treasury, Monthly Treasury Statement, final fiscal 2025 edition, customs duties collected; Committee for a Responsible Federal Budget, "Tariff Revenue Soars in FY 2025 Amid Legal Uncertainty"
• Congressional Budget Office, An Update About CBO's Projections of the Budgetary Effects of Tariffs, 2025
• Federal Reserve Bank of Richmond, "How Much Revenue Has Been Raised by Tariffs So Far?" 2026
• Amiti, Redding and Weinstein, "The Impact of the 2018 Tariffs on Prices and Welfare," Journal of Economic Perspectives 33:4 (2019), on pass-through to domestic prices
• Proposals № 001 (The American Dividend); № 017 (Dividend Day); № 038 (The Carbon Dividend); № 050 (The Shareholder's Report); № 051 (The Citizen Card); № 068 (The Mint Dividend)