Why solving our fiscal problems requires more than populist revenue

Dan’s recent blog on tariffs sparked great debate—and it’s exactly the kind of back-and-forth that makes Gatewood special. We don’t always agree, but we’re united by a deeper goal: helping clients—and the country—move forward with clarity.

In fact, Dan and I agree on much more than we disagree. We both want fiscal sanity. We both want a more secure, more sovereign America. But where I start to diverge is in how we get there—and more importantly, what costs we may be ignoring along the way.

The Patriotic Appeal

Tariffs have an undeniable surface-level appeal. They feel like we’re standing up for ourselves. They’re visible, easily framed as constitutional, and unlike the income tax, they don’t require the IRS knowing the color of your wallpaper.

For those of us who believe in limited government, sound money, and national sovereignty, tariffs can feel like a clean swap: ditch the bloated tax code, bring back duties on imports, and reignite American industry.

But that’s the illusion. We’re not replacing anything—we’re adding.

If Tariffs Fix It… Why More Debt?

Let’s be honest about the timing. If tariffs were the fix, why did the same legislative push include a $5 trillion hike to the debt ceiling?

Yes, our tax system is bloated and full of misaligned incentives. But changing the source of tax revenue without reducing the need for tax revenue just feeds the same appetite with a different spoon.

Dan—and even the Trump administration, at times—have argued that no one is offering serious spending cuts. But that’s not quite accurate. DOGE is actually an example of a proposed constraint with substantial support, at least among the public.[1]

Likewise, leaders like David Stockman, Rand Paul, and Thomas Massie have consistently proposed concrete spending reductions.[2] Think tanks like the Heritage Foundation have published full spending-cut blueprints—for example, their “Blueprint for Balance” report offers detailed proposals across discretionary and mandatory spending categories.[3] The problem isn’t a lack of ideas—it’s a lack of political will. And when the addiction runs this deep, adding more revenue doesn’t promote sobriety—it just buys more drinks.

As an aside, entitlement reform is where the real fiscal reckoning lies. These off-balance sheet liabilities are rapidly becoming on-balance. Means testing, extending age eligibility, and protecting those already relying on Social Security is likely the responsible, principled path forward. But that requires honesty—and the courage to call these programs what they legally are: welfare benefits.[4]

Tariffs Are Taxes—Let’s Not Pretend Otherwise

We can debate whether tariffs are inflationary (and I tend to agree with Dan: they’re not in the strict monetary sense). But they are a tax. Like all taxes, they distort prices, create inefficiencies, and protect the politically connected.

Tariffs rarely stop at revenue. They become vehicles for cronyism. Industries seek shelter, not strength. Consumers pay more, often unknowingly. The economy shifts—not through innovation, but through manipulation.

We may “win” a few trade skirmishes, and no, this isn’t Smoot-Hawley 2.0. But if our goal is genuine economic progress, tariffs risk lowering our standard of living—especially if they mask the real disease: runaway spending.

What Actually Works

Here’s what history supports:

• Lower and flatter tax codes
• Capital formation and voluntary exchange
• A federal government limited to its essential roles

We’ve seen it repeatedly: prosperity isn’t determined by how you collect revenue, but by how much is taken and how little the market is distorted in the process.

History shows that income taxes, even with rate changes, tend to remain a steady share of GDP—an observation often attributed to Hauser’s Law, which suggests that federal tax revenues rarely exceed 19–20% of GDP regardless of marginal tax rates. This pattern is also supported by Congressional Budget Office (CBO) data over the past several decades.[5] What shifts is who shoulders the burden. And corporate taxes—despite political rhetoric—have declined significantly as a share of overall federal revenue, falling from over 10% in the late 1980s to under 7% in recent years.[6] It’s no wonder Washington is eager to find new tools.

The Real Discipline Test

In theory, tariffs could be a more visible and arguably more constitutional source of revenue—if they were replacing something.

But they’re not. And they won’t. Not without structural reform. Not without Congress giving up its favorite excuse: “We just need more revenue.”

Dan and I agree: America needs to get its fiscal house in order.

But the discipline we need won’t come from patriotic branding or populist packaging.

It will come from restraint. From honesty. And from the courage to say no—not just to foreign imports, but to our own worst habits.

Want to talk about how policy changes might affect your financial plan? Reach out—we’d love to help you navigate it.

Want to hear the other side?

Gatewood’s COO, Dan Goeddel makes the case for tariffs as a practical, if imperfect, fiscal tool. [Explore Dan’s View →]

Family Footnote

Fun fact: I had a family member involved in the Boston Tea Party. Contrary to popular belief, it wasn’t about high taxes. It was about removing a tax that gave British tea a price advantage over American-smuggled tea. The rebellion wasn’t over taxation alone—it was over losing an advantage because of taxation. And some things never change.

[1] Axios. “House passes bipartisan DOGE Act aimed at ending government waste.” https://www.axios.com/2023/11/15/doge-act-house-bill-wasteful-spending

[2] Rand Paul’s “Festivus” Reports, David Stockman’s works like “The Triumph of Politics,” and Thomas Massie’s repeated bills and votes targeting discretionary spending.

[3] Heritage Foundation. “Blueprint for Balance.” https://www.heritage.org/blueprint-balance

[4] I sympathize with those who say, “I paid into the system.” Many were led to believe Social Security was a personal savings or insurance program. But as the Supreme Court confirmed in Flemming v. Nestor (1960), Social Security is a general welfare benefit—not a contractual right. That doesn’t mean we shouldn’t protect those counting on it, but it does mean we need to be honest about the structure going forward.

[5] Congressional Budget Office. “The Long-Term Budget Outlook.” 2023. https://www.cbo.gov/publication/58946

[6] Tax Policy Center. “Corporate Income Tax as a Share of Federal Revenue.” https://www.taxpolicycenter.org/statistics/corporate-income-tax-share-total-revenue

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor.