Sen. Josh Hawley (R-Mo.) introduced legislation last week echoing President Donald Trump's desire for tariff rebate checks of $600 or more per adult and child. NBC News said the check would be "similar to the stimulus checks the government distributed during the Covid pandemic." That comparison has some conservatives in full-blown revolt.

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Dana Loesch called the rebates "not conservative" on her show last week. "We’re $37 trillion in debt and running $2 trillion a year deficits," Sen. Ron Johnson (R-Wis.) said, adding, "Some time this madness just has to end." Sen. Bernie Moreno (R-Ohio) was even more adamant, saying, “Oh God, no, insane... it’s extraordinarily inflationary."

Despite the conservative backlash, I think Trump and Hawley are onto something here, so let me tell you why rebates are a brilliant idea.

There's a general consensus — not a strong consensus, granted — that consumption taxes are usually preferable to income taxes. They encourage saving and investing over spending, and in a sense are voluntarily.

Tariffs are a consumption tax and, oddly enough, one that fell out of favor — even among many economists who generally prefer consumption taxes.

But Trump has something bigger in mind than just raising revenue or encouraging domestic production, nicely summarized for RealClearPolicy on Saturday by Red Jahncke:

Since Lyndon Johnson launched the War on Poverty, the U.S. has transformed into a consumption-driven service economy with increasing income redistribution, i.e. social welfare programs. Apparently believing that [is] a dead-end formula, President Trump is trying to reverse all three elements: less consumption, more production and less income redistribution. The idea is that more production will generate more income at all levels, reducing the need for social welfare programs. Take note, Democratic Socialists.

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But none of that comes without some amount of pain, as Trump has warned — particularly at the cash register.

Enter, stage right: Hawley's proposed rebates, which remind me a bit of the ultimate consumption tax: the Fair Tax.

I've written about it before, but the Fair Tax (unlikely as it would require repealing the Income Tax Amendment) would eliminate all federal taxes (yep, all of them) and replace them with a 23% national sales tax on services and the first-time sale to consumers of new finished goods.

A 23% sales tax would be incredibly painful for those on the lower end of the income scale, but the Fair Tax also includes a monthly household "prebate" check (for ALL households) to ease the pain. Anyone — even billionaires — spending at poverty levels would pay an effective tax rate of zero. Businesses would pay zero in federal taxes, making the U.S. a massive tax haven for manufacturers and anyone else.

And Another Thing: Tariffs are not inflationary. Lefties like using the word because it allows them to smear Trump with the least popular memory of the Biden years. But while tariffs can (and usually do) raise prices, it's wrong to label every price hike as inflation. It's a tax hike. Prices rise and fall all the time, and so do taxes. Inflation is exactly one thing: the money supply increasing faster than the availability of goods and services. Refunding a portion of new tax revenue only changes who spends the money. It does not increase the supply of money.

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Collected at the cash register just like state and local sales taxes (with a nice little collection fee for states and retailers), everybody pays. But only citizens and legal residents collect the prebate. Talk about a disincentive to stay in the country illegally.

The Fair Tax is a nifty idea, admittedly unlikely — but Hawley's rebate checks would have a similar effect of easing the pain created by a new consumption tax.

So why not take a nice fraction of the massive tariff revenue that Washington is collecting — an estimated $3.2 trillion-with-a-t over ten years — and give it back to consumers? Maybe you'd put that money into the stock market, effectively taking a consumption tax and putting it toward economic growth. Maybe you'd spend it on American-made goods. Maybe you'd blow it on Temu crap and send some of that money right back to the Treasury.

All the options look like win-wins to me.

On the other hand, Hawley also just proposed raising the federal minimum wage to $15, so maybe we've both been drinking.

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