Trump Regime supporters lately have touted that tariffs are raising revenue and shrinking the deficit. They neglect to mention that the increase in tariff revenue have largely been offset by a drop in corporate income tax collections.
And then there are the yet to be felt likely effects. Tariffs squeeze consumers, push up goods prices, and starve states and cities of revenue. Commercial property owners are knocking billions off their tax bills through appeals, and there is evidence that housing prices are beginning to bend over. If that turns into a trend, then local tax revenues will get hit even harder, particularly in urban areas where commercial real estate taxes are major contributors.
Meanwhile, Washington can keep selling paper because deficits fund themselves. State and local governments don’t have that luxury.
Tariffs = higher costs, lower sales taxes
Tariffs are a tax. Consumers pay more for imported goods. It might not bother upper income consumers, but this in the middle and below will feel the pinch. That means less cash for restaurants, retail, and durables — the backbone of state sales-tax revenue. Washington gets to book a short-term boost from tariff collections, but state coffers take the hit as discretionary sales flatten. And as the tariff hit deepens and prolongs, not only will corporate income tax take a hit, but the if the economy softens, so will withholding and non withheld individual income taxes.
Commercial property: the appeals wave is already here
Office values are down 30–40% from peak depending on which index you trust. Landlords know it, lenders know it, and now assessors are being forced to recognize it.
1. Green Street CPPI (Dec 2023) — Office Sector
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According to Green Street’s Commercial Property Price Index, office values are down ~35% from the March 2022 peak, while the broader “all-property” index is down ~22% McKinsey & Company Moody’s CRE greenstreet.com
2. Moody’s / Conference Board (reported mid-2024)
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Moody’s analysts estimate office values have already slumped by up to 35%, with a further 26% decline possible by year-end, depending on vacancy trends CFO Dive.
3. CRE Daily / MSCI (Aug 2024) — CBD-focused
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Central business district office values have dropped 52% from 2019 to 2023, translating to a $557B loss in downtown commercial valuations naiop.org
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Philadelphia just cut assessments on about half of its top 100 commercial properties for 2025, lowering tax bills on major towers. WHYY News analysis confirms: “About half of the city’s 100 most valuable commercial properties have lower tax assessments for 2025” WHYY
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In Cook County, commercial appeals over the past three years wiped $25 billion off valuations and shifted the burden onto homeowners. Between 2021–2023, commercial property appeals reduced assessed values by $25.5 billion, cutting business tax bills $3.3 billion overall. This pushed $1.9 billion in new taxes onto homeowners Cook County Treasurer.
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Appeals calendars for 2025 are active across the country. Owners are filing, and they’re winning.
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Philadelphia property reassessment notices were delayed, which pushes the responsibility—and opportunity—to file appeals onto owners phila.gov
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In Cook County, tax appeal filings spiked: an ~41% increase in PINs for 2024 reporting year cookcountyboardofreview.com
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That revenue hole is baked in. It doesn’t show up in national economic data yet, but it’s already hitting local budgets.
Housing is rolling too
New home prices are down 14.4% from the December 2022 peak. Average purchase mortgage size is down 15.6% from May 2023 peak. That will roll into reduced property tax revenues if it turns into a sustained trend. Some markets are already in decline.
Corporate profits and payroll taxes next in line
Tariffs eat into margins. Input costs rise, volumes slip. Corporate tax receipts follow profits lower. Payroll taxes follow hiring. Corporate tax receipts plunged 28% year-on-year in July, according to the Daily Statement. Year to date corporate taxes are reported down 6% or $28 billion in the Monthly Treasury Statement. Quarterly corporate income taxes are due September 15. We’ll know more from the Daily Treasury Statement in the following days as those receipts are recorded.
Quadruple hit to state and local revenues
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Tariffs cut discretionary spending → weaker sales taxes.
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Commercial appeals + falling comps → property tax collapse.
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Margin squeeze → weaker corporate taxes.
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Slowing payrolls → softer withholding.
States and cities can’t print. They cut services, raise rates, or borrow at wider spreads. All of that is pro-cyclical. It makes the downturn worse.
Confidence crash
Higher goods prices, service cuts at the local level, and job insecurity. That’s how confidence breaks. Add the visual of protests and troops in the streets, and you’ve got the consumer psychology shock that turns slowdown into recession.
The federal machine vs. the local reality
Treasury deficits fund themselves. Issue debt, fill the TGA, spend it back into the economy, deposits rise. Bank deposits are up $350 billion since July. Money funds have risen by $133 billion. That’s why the Treasury market hasn’t cracked.
But state and local governments don’t live in that loop. They live on property values, sales taxes, corporate profits, and payrolls. All four are under pressure. That’s where the crisis will show up first.
Conclusion: Tariffs don’t fix the deficit. They just shift the burden down the food chain. Washington collects the revenue, while states, cities, and households take the hit. The Treasury market keeps humming, but the rest of the system is walking into a fiscal and confidence crash.
Meanwhile the effects of ever increasing money supply on consumer prices and asset prices will cause dislocations. As US money supply grows faster than the money supplies of other major currencies the dollar will continue to decline, further increasing pressure on imported goods prices. No doubt domestic prices will follow.
The increase in money may contribute to the bubble in stock prices for a while longer. But when bond market confidence cracks due to higher inflation, so will the markets, with the effects multiplied by incredible levels of leverage.
