


Rebates tied to inflation can turn the lemon of inflation into the lemonade of a GOP that directly helps the working class.
S enator Josh Hawley’s (R., Mo.) new bill to provide $600 rebate checks for most adults and dependent children to offset the cost of President Trump’s tariffs is predictably being panned by the anti-tariff right. While Hawley’s idea is unnecessarily profligate, there’s a good case for the basic concept.
Trump’s tariffs are already bringing in significant revenue for the federal government. Tariff receipts reached nearly $27 billion last month and will probably increase as the rates are expanded to more countries and goods. Treasury Secretary Scott Bessent already projects that tariff revenue could equal $300 billion this year. An increase in monthly revenue to $30 billion or more means that amount could rise substantially.
Many fear that tariffs will raise the prices that Americans will pay for a host of goods, including food imported from abroad. Those hikes would hurt already hard-pressed families that have yet to fully recover from Biden-era inflation.
That hasn’t happened yet. Annual inflation is down if one looks only at the first five months of Trump’s second term, and we have not seen the price hikes that were anticipated for goods like automobiles.
But that doesn’t mean we won’t. Tariffs are paid for by importing companies, and they have to pass on the cost somehow. Eating the tariffs paid simply reduces earnings, which passes the pain on to investors. Raising prices passes the pain to consumers — meaning everyone.
Republicans will not want to enter next year’s midterms with millions of voters disappointed and angry that inflation for basic goods has not gone down. Biden’s poor record on inflation was a major reason that Vice President Kamala Harris lost. The GOP will want to show they have done better on this important issue, not worse.
That’s where tariff rebates come in. If Trump’s signature economic policy does end up raising prices, rebating some or even most of that revenue to consumers will shield them from the pain tariffs cause.
Ideally, this would increase voters’ willingness to give Trump’s tariffs the time to attract investment and jobs back to our shores.
Hawley’s plan is excessive because the amount of the rebate has no connection to the amount of any price increase. Most families of four would simply get $2,400 even if prices haven’t risen.
That’s the “print money” approach that fueled Biden’s inflation. It’s the polar opposite of what responsible, populist-minded Republicans should want.
Suppose, however, that the rebate amount is tied to the level of inflation for tariff-affected goods. Then we move from inflation-stoking pandering to politically sound management.
Here’s an example of how this could work.
The Consumer Price Index is composed of hundreds of sub-indices for discrete categories of goods and services. The overall CPI identifies the share of total consumer spending that each subindex contributes to the overall price index, and the overall inflation rate is the sum of the price changes in each subindex weighted by that element’s share of the total. The Department of Labor could identify which sub-indices are significantly affected by the tariffs. They could then create a tariff-affected price index identifying the degree to which overall consumer spending has been harmed by tariff-induced price hikes.
That figure can then be used each January to calculate a rebate amount. The index figure would be applied to a taxpayer’s gross income to estimate how much more that household had to spend to pay the tariff-induced price hikes. The rebate that household would receive would be included as a 100 percent refundable tax credit on that family’s 1040 due on April 15.
This approach would be just another version of what the IRS does each year for other components of the iconic tax form.
One could even make it simpler for those who do not want to go through the trouble of filling out a tax worksheet to calculate the rebate amount. Filers with gross income under a certain level, say $50,000, could simply receive a small $50 or $100 per-person rebate. That amount may not fully cover tariff-caused inflation, or it could be more than it. The simplicity of such an approach, however, would ensure that people understood that they are not being harmed by any incidental negative impact that tariffs cause.
This approach would likely build public support for the tariffs as well. That might be a reason why Trump mused, even before Hawley introduced his bill, that he might support the concept.
Tariff foes won’t like this idea precisely because it could have this effect. But then they need to provide an alternative to tariffs that fulfills the populist conservative desire to reindustrialize America and reduce our economic reliance on China and other unfriendly nations.
Without that, they are effectively saying that we need no reform in the wake of the past 25 years of globalization. That flies in the face of the sentiment of blue-collar former Democrats whose votes elected Trump twice and who have made the Senate tilt toward the GOP.
Trump is betting his and his party’s political future on a tariff-inspired economic renaissance. Tariff rebates tied to inflation can turn the lemon of inflation into the lemonade of a GOP that directly helps the working class. That’s something that Trump and Republicans who want to win should quickly endorse.