Tariff Refund Delays Could Cost Taxpayers $700 Million A Month
"Hopefully, the administration stops trying to slow down the process—if only for taxpayers’ sake..."
By Scott Lincicome, Nathan Miller, and Alfredo Carrillo Obregon, CATO Institute
We wrote last week that the Trump administration might renege on its multiple promises to quickly refund IEEPA tariffs now that the Supreme Court has invalidated them—a new court filing unfortunately indicates that the government is doing just that. As we’ll show today, delays could cost US taxpayers billions of dollars in needless interest payments on tariff collections that the government must now repay.
Last Friday, Justice Department attorneys opposed a request by the plaintiffs in the tariff case that the Court of Appeals for the Federal Circuit (CAFC) expedite the refund process by immediately remanding the case to the US Court of International Trade, which will initially handle refunds. Even worse, the government’s lawyers asked the CAFC to pause this initial process for at least 90 days, meaning that the case wouldn’t get back to the CIT until around June 22 (the 90-day pause plus the customary 32-day period for the Supreme Court to send its February 20 decision to the CAFC).
The CAFC will hopefully deny the government’s request. First, the administration’s unjustified heel-dragging would hurt US importers who continue to wait for the government to return the roughly $175 billion that it illegally extracted from them—capital that American firms can’t devote to their actual business operations because it’s currently tied up in bonds.
Second, these delays would leave American taxpayers on the hook for billions in interest that the government would owe importers on top of the tariff refunds—interest that the government has already acknowledged in multiple public filings and has promised to pay. Federal regulations govern interest on duty overpayments, and the CBP reports a simplified formula here. Interest compounds daily at an annualized rate equal to the IRS corporate overpayment rate—4.5 percent for overpayments exceeding $10,000 and 6 percent on anything below it.
Conservatively using the lower rate for all entries, we calculate in Figure 1 that $700 million in interest is added to the final bill every month that the government delays tariff refunds, or around $23 million per day.
We wrote last week that the Trump administration might renege on its multiple promises to quickly refund IEEPA tariffs now that the Supreme Court has invalidated them—a new court filing unfortunately indicates that the government is doing just that. As we’ll show today, delays could cost US taxpayers billions of dollars in needless interest payments on tariff collections that the government must now repay.
Last Friday, Justice Department attorneys opposed a request by the plaintiffs in the tariff case that the Court of Appeals for the Federal Circuit (CAFC) expedite the refund process by immediately remanding the case to the US Court of International Trade, which will initially handle refunds. Even worse, the government’s lawyers asked the CAFC to pause this initial process for at least 90 days, meaning that the case wouldn’t get back to the CIT until around June 22 (the 90-day pause plus the customary 32-day period for the Supreme Court to send its February 20 decision to the CAFC).
The CAFC will hopefully deny the government’s request. First, the administration’s unjustified heel-dragging would hurt US importers who continue to wait for the government to return the roughly $175 billion that it illegally extracted from them—capital that American firms can’t devote to their actual business operations because it’s currently tied up in bonds.
Second, these delays would leave American taxpayers on the hook for billions in interest that the government would owe importers on top of the tariff refunds—interest that the government has already acknowledged in multiple public filings and has promised to pay. Federal regulations govern interest on duty overpayments, and the CBP reports a simplified formula here. Interest compounds daily at an annualized rate equal to the IRS corporate overpayment rate—4.5 percent for overpayments exceeding $10,000 and 6 percent on anything below it.
Conservatively using the lower rate for all entries, we calculate in Figure 1 that $700 million in interest is added to the final bill every month that the government delays tariff refunds, or around $23 million per day.
Thus, for example, the 120-plus-day delay the government just requested would cost taxpayers almost $3 billion in additional interest. And if the government were to drag out refund lawsuits until the end of the president’s term, as he recently suggested, taxpayers would owe importers about $25 billion more. (For context, that’s almost the annual budget of NASA.)
In our opinion, it’s not worth the Justice Department’s time and resources to fight IEEPA tariff refunds that the government has already promised, but it’s certainly not worth another $23 million a day to American taxpayers.
[UPDATE: As this blog post was being published, the CAFC rejected the administration’s request for a delay. Hopefully, the administration stops trying to slow down the process—if only for taxpayers’ sake.]
Thus, for example, the 120-plus-day delay the government just requested would cost taxpayers almost $3 billion in additional interest. And if the government were to drag out refund lawsuits until the end of the president’s term, as he recently suggested, taxpayers would owe importers about $25 billion more. (For context, that’s almost the annual budget of NASA.)
In our opinion, it’s not worth the Justice Department’s time and resources to fight IEEPA tariff refunds that the government has already promised, but it’s certainly not worth another $23 million a day to American taxpayers.
[UPDATE: As this blog post was being published, the CAFC rejected the administration’s request for a delay. Hopefully, the administration stops trying to slow down the process—if only for taxpayers’ sake.]
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The funny part is the Republicans could have codified them. Could have. Should Have. Would have. Won't.
How is it possible to determine who gets what if refunds are made? Business always passes higher costs on to the consumer, but which consumers paid the higher prices?
If the federal government is forced to send anything to anyone, they will replace it with more borrowed money in the future, increasing the debt owed by the government which is owned by all Americans. This is a zero sum game for the government, but it is a win lose game for some in America if some sort of refund is made. It would make more sense to just allow the government to use these funds as part of their operating revenue, which will reduce the amount of money the government will borrow. In addition, if the government borrows more, that means more money will be "printed" which will inevitably increase inflation, which affects each and every one of us.
The Trump Derangement Syndrome keeps costing all of us, including those who have TDS.