Regulation or tax? Trump’s focus on money-raising power of tariffs muddies pitch to Supreme Court

Administration officials say President Trump must have the power to regulate and rebalance trade through tariffs, and the money reaped is “incidental” to those goals.

But for Mr. Trump, the sudden inflow of cash is a huge part of the appeal, complicating his legal team’s claim that revenue is a mere byproduct of his tariff plans.

“Recently, they said they found billions of dollars. I said check the tariff shelf,” Mr. Trump said recently in the Oval Office, describing an uptick in government receipts. “We’re a rich country again.”

Mr. Trump has repeatedly said tariff revenue could replace the federal income tax. He said that’s how it worked during U.S. boom times from 1870 to 1913.

The president also emphasizes the negotiating power of his tariffs, saying they forced China to the table on fentanyl and helped him end wars. He described it as a “defensive mechanism” on Thursday, pointing to other countries that impose tariffs on U.S. goods.

Yet he’s boasted about tariff revenue time and again, potentially undercutting Solicitor General D. John Sauer’s argument before the justices.

“These are regulatory tariffs. They are not revenue-raising tariffs. The fact that they raise revenue is only incidental,” Mr. Sauer told the high court on Wednesday.

Hours later, Mr. Trump pointed to the billions in tariff revenue filling U.S. coffers, underscoring their potential as a moneymaker.

“My tariffs are bringing in hundreds of billions of dollars and are helping slash the deficit this year by more than 50%,” Mr. Trump said Wednesday in Miami. “Did you see those numbers? We’re going to be down 50%. Anywhere from 25 to 50, but closer to 50%. Who would think that one? Those are big numbers.”

Whether the tariffs are a revenue-raising exercise is at the heart of the Supreme Court case brought by small businesses who say Mr. Trump overstepped his authority with his nation-by-nation tariffs.

The Constitution gives Congress the power to raise taxes and impose customs duties, but Mr. Trump says lawmakers, in a 1977 law, delegated much of that power to the president, and he’s using it as leverage in trade negotiations.

Justices on both sides of the aisle questioned that, saying tariffs resemble a tax because Americans who purchase foreign goods must pay the duty to U.S. customs.

Economic experts say Mr. Trump’s own remarks seem to contradict his team’s argument.

“Most of Trump’s remarks on tariffs, as well as his Cabinet’s and trade officials’, use the revenue-generating aspects of tariffs in their defense of the policy. They even included estimates of the significant revenues in their brief to the court,” said Erica York, vice president of federal tax policy at the Tax Foundation. “You cannot divorce the revenue-generating aspect of an import tax from its other effects.”

Treasury Secretary Scott Bessent, in a petition to the Supreme Court, estimated the U.S. could be forced to refund $750 billion to $1 trillion in tariff revenue if the court rules against Mr. Trump and the ruling does not arrive until June.

During arguments, Justices Clarence Thomas and Samuel A. Alito Jr. said it may be possible to issue tariffs for non-revenue purposes, particularly when tariffs are meant as a tool of foreign policy.

They postulated situations in which a president would use tariffs to prod the release of a U.S. citizen being held hostage by a foreign power.

Still, Chief Justice John G. Roberts Jr. highlighted evidence that the tariffs have been “responsible for a significant reduction in our deficit.”

“I would say that’s raising revenue domestically,” the chief justice said.

Mr. Sauer stuck to his point that Mr. Trump’s levies are regulatory, and that they raise money only as an “incidental and collateral effect.”

Wayne Winegarden, a senior fellow in economics at the Pacific Research Institute, said the administration’s lawyers are “obfuscating what is a very clear topic.”

“Tariffs are taxes and therefore their revenue-raising properties are not incidental. They are a core aspect of the policy,” he said. “Trump’s own claims that other countries will pay these costs and that you can replace the income tax, neither of which are correct, absolutely contradict the solicitor general’s position.”

The White House did not respond to a request for comment about whether the president undercut his legal team with his rhetoric on revenue.

Mr. Bessent, who attended the midweek court arguments, echoed Mr. Sauer in saying revenue isn’t the key point. 

He said a proper tariff policy would amount to a “shrinking ice cube” that forces manufacturing home to the U.S, allowing tariffs to gradually disappear.

“The tremendous amount of revenue we’re taking in is [a] coincidence,” the secretary told Fox Business. “And the real goal here is to rebalance our trading relationships and bring home manufacturing.” 

Mr. Bessent predicted victory before the court, so the administration is downplaying the possibility of tariff refunds.

“We will cross the bridge if we come to it,” he said, “but I’m confident we won’t have to.”