Kadas: Tariffs are a national sales tax on all of us

Mike Kadas

A tariff is a tax that is placed on a good as it is imported into the United States. In 2025 average tariffs on imported goods have increased from 2.5% in January to 16.8% by this November. Imports make up around 15% of GDP. This results in a national sales tax of about 2.5%.

Simply put, tariffs raise the price of the goods that are imported. Some portion of a tariff may be initially absorbed by the producer or retailer of the goods, but over time, if the market is competitive, the tariff will be reflected in the price of the good or in a reduction in the quantity of the good sold. This is supply and demand at work.

Tariffs are regressive. People with low or middle income pay a higher percentage of their income than people with a high income. This is because a family with an income of $50,000/year is likely to spend all or almost all of that income over the course of the year, while a family with an income of $500,000 is likely to only spend a portion of that income and will be able to put the remainder in savings or investments, which are not taxed.

Sales taxes are bad enough, but tariffs are even worse. This is because the tariff is hidden in the price of the product at the time of purchase rather than being added to the price of the product at the time of purchase. With sales tax you can see the amount of the tax on the sales receipt. Not so with tariffs.

In addition, tariffs also often affect the price of goods that are produced in the U.S. such as tariffs on steel and aluminum. Those extra costs are built into any of the products that are produced domestically which utilize steel or aluminum.

For 60 years Montanans have pushed back against repeated efforts to institute a state sales tax. We have twice defeated a sales tax on the ballot and the legislature has repeatedly defeated sales tax proposals. This opposition has been primarily based on the fact that a state sales tax would be a new tax and that a state sales tax would be regressive.

The new National tariff tax meets both of those objections. And yet all four of Montana’s representatives in Congress have stated their support for this new National Sales Tax. This should not surprise us. They are all multimillionaires and so will be minimally impacted.

Mike Kadas served as director of the Montana Department of Revenue from 2013 to
2018