Tariff Dividends Cost More than Tariff Revenues Will Generate

President Trump has repeatedly called for sending $2,000 “tariffTariffs are taxes imposed by one country on goods imported from another country. Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters. dividends” to low- and middle-income Americans, saying revenues from his increased import taxes can cover the cost and still pay down the debt. While doing so would require an act of Congress, and details on the proposed $2,000 payments have not been fully fleshed out, we model a range of options to illustrate the potential price tag and compare that cost to expected tariff revenues. We estimate the cost of different designs would range from $279.8 billion to $606.8 billion—more than what tariffs will raise in 2025.

The president has said the rebates would go to all low- and middle-income people, and the Treasury Secretary suggested an income cutoff of $100,000. We model three options:

Option 1: $2,000 per person payments that have a hard cutoff of $100,000 for all filers.
Option 2: $2,000 per person payments that begin phasing out at a 5 percent rate above $100,000 for all filers.
Option 3: $2,000 per person payments that begin phasing out at a 5 percent rate above $150,000 for joint filers, $112,500 for head of household filers, and $75,000 for single filers.

For each option, we first model the total cost if only taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. filers and their spouses qualify for the payments, then we model the total cost if dependents qualify and if non-filers (people who do not make enough income to file taxes) qualify.

Of the different designs, Option 3 is the closest to the stimulus checks distributed during the pandemic, which provided at least partial payments to dependents, phased out at different income levels according to filing status, and allowed non-filers to qualify.

Table 1. Costs of Different $2,000 Tariff Rebate Designs

Source: Tax Foundation General Equilibrium Model, November 2025.

Through mid-September of this year, the president’s new tariffs have generated about $117 billion in payments, but the actual revenue generated for the government from tariffs will be lower than direct tariff payments.

That’s because tariff revenue estimates must account for what’s known as the “income and payroll tax offset.” The offset reflects a real-world mechanical effect of indirect taxes like tariffs and excises: when the government takes a dollar out of the private sector before that dollar is paid to households (either through labor income for workers or capital income for shareholders and business owners, together known as factor income), it directly shrinks those tax bases.

Most estimates place the offset somewhere between 23 percent and 25 percent, so we need to discount tariff collections by that much to see the final revenue impact of tariff collections.

We estimate the new tariffs will generate $158.4 billion in total revenue during 2025 and another $207.5 billion in 2026. That compares to an estimated cost of “tariff dividends” of between $279.8 billion and $606.8 billion, suggesting that most designs would absorb all the revenue generated so far, and most or all that will be generated in the next calendar year.

Even if all tariff revenues, including pre-existing and new tariffs, went toward rebates, revenue would still fall short. From January through September of 2025, total customs duties collections reached $174 billion, before accounting for the income and payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. offset. Even factoring in the collections that will come in over the remaining three months of the year, tariff money would not pay for even the narrowest tariff dividend option.

It remains unclear whether the $2,000 payments would be paid out one time or annually. If the Option 3 dividend that would cost $606.8 billion were repeated annually over the budget window, the 10-year cost would total $5.97 trillion from 2026 through 2034. That compares to the expected 10-year revenue from all the president’s new tariffs of $2.3 trillion conventionally, before accounting for how economic harm would reduce tax revenues.

Under nearly any design option, sending out $2,000 payments to Americans would increase, not decrease, the federal budget deficit. A better way to provide relief from the burden of tariffs would be to eliminate the tariffs.