Blizzards & Tariffs Hit Washington 2/23/26

Summary

Squawk Pod – “Blizzards & Tariffs Hit Washington” (2/23/26) CNBC’s Squawk Box with Joe Kernen, Andrew Ross Sorkin, Steve Liesman, Jamie Peterson, Natasha Sarin, Stephen Moore
Date: February 23, 2026

---

Episode Overview

This episode of the Squawk Pod dives into two dominant issues:

1. The Supreme Court’s decision to overturn President Trump’s tariffs, upending years of trade policy and introducing new uncertainty for businesses and trading partners worldwide.
2. A proposed millionaire income tax in Washington State, as state lawmakers weigh how new taxes might impact companies like Microsoft, Amazon, and Starbucks—and whether an income tax could prompt wealthy residents to flee.

Throughout, the hosts dissect the dilemmas facing investors, governments, and companies amid headline-grabbing economic turbulence, while a blizzard literally buries the Northeast.

---

Key Discussion Points & Insights

1. Supreme Court Overturns Trump Tariffs ([01:02]–[43:32])

Tariffs: Legal Turmoil and Economic Fallout

• The Supreme Court ruled that Trump’s tariffs, imposed under the International Emergency Economic Powers Act (IEEPA), were illegal. As a result, U.S. Customs and Border Protection will halt collection of those tariffs, but other tariffs remain.
• Ongoing Uncertainty:
  • Administration is pivoting to tariffs under alternative authorities (Section 301 and Section 232), creating a patchwork system and short-term windows for legal cover (only 150 days under Section 122).
  • Uncertainty for American and foreign companies regarding future trade costs, investment decisions, and the likelihood of refunds for tariffs already paid.
• Cost to Business and Consumers:
  • Estimates suggest U.S. households faced a $1,000 tax increase in 2025 due to Trump-era tariffs; under new rules, it drops to $700 for 2026 ([19:13] Steve Liesman).
  • Economists expect less inflationary pressure going forward, but prices may not roll back, and uncertainty persists.
  • “We doubt that businesses which recently raised their prices due to tariffs will lower them back. They would likely wait for more clarity on the future tariff rates.” — Barclays (quoted by Steve Liesman [19:13]).
• Refund Questions:
  • Potential refunds of up to $175 billion are in limbo, pending lower court rulings and complex standing requirements ([01:52] Stephen Moore, [08:11] Joe Kernan, [34:48]–[39:42]).
  • “The big question that I'm being asked by all businesses ... will they be repaid the money that they paid in the tariff?...$175 billion that would have to be returned. I don't know the answer to this, but I know it's going to be a big, big issue that's debated.” — Stephen Moore ([39:09])
• International Ramifications:
  • Trade deals with countries like Japan, South Korea, and European partners may unravel as foreign governments reconsider their commitments (e.g., [09:20]–[10:09], [41:32]–[43:32]).
  • “The world looks less stable, and the United States looks less stable as a trading partner. And that's here with us for some time going forward.” — Natasha Sarin ([42:52])

Notable Quotes & Exchanges

• Joe Kernan:
  “You must be out of your mind to follow the rules here because it is so complicated, so complex, so changing every day. And this is antithetical to the administration’s own central initiative of deregulation and being pro and business friendly.” ([01:25])
• Andrew Ross Sorkin:
  “If you might recall, Joe, from the very beginning of this, I said if the president wants to put tariffs on for that reason, he must go to Congress to create a more stable regime. And it was not a question of whether or not tariffs good, tariffs bad. But you want people to make investment, you got to have stability.” ([30:24])
• Steve Liesman:
  “There will be greater uncertainty as we wait for how the administration ultimately fashions a new set of import tax measures.” ([19:13]) “Only a stable tariff regime can result in that kind of investment.” ([30:24])
• Natasha Sarin:
  “This is a moment of great uncertainty and volatility, not just for consumers, not just for businesses, but also for our trading partners and for adversaries.” ([02:09])
• Stephen Moore:
  “…as someone who's not a fan of tariffs, I am a fan of these trade deals that Trump has brought home ... now he's lost that negotiating tactic. So that's, I think, one of the reasons Trump is so angry about this decision.” ([33:53])
• On Political and Social Media Fallout:
  • President Trump publicly rebuked Supreme Court justices he appointed, saying on Truth Social he was ashamed of Barrett and Gorsuch ([05:54]).

Broader Economic and Political Analysis

• Market Impact:
  • Joe Kernan questioned whether the business uncertainty is as severe as some fear, given strong market performance and earnings ([27:32]–[28:46]).
• Long-term vs. Short-term:
  • Ongoing instability in the tariff regime could choke off long-term investments, as companies are unsure what supply chain decisions to make ([09:51], [41:32]).
• Congress’s Role:
  • The Supreme Court’s ruling makes clear that durable tariff policy should be legislated, not imposed by executive emergency powers ([35:30]–[36:02]).
  • “No president, not this president or an AOC or Kamala Harris, should have the authority to say, well, we have an emergency here, so we're going to raise taxes without any approval from Congress.” — Stephen Moore ([35:30])
• “Taxation without representation is so terrifying that this country was founded on the principles that you have to have some sort of deliberative process that goes through Congress.” — Natasha Sarin ([36:17])

---

2. Political Flashpoints: Susan Rice, Netflix, and De-banking ([11:22]–[16:43])

• President Trump called for Netflix to remove Susan Rice from its board after she made comments about companies facing consequences in a future Democratic administration.
  • Both hosts agreed such rhetoric is dangerous for both sides and should not factor into business decisions:
    • “I think it's terrible. I think it's terrible.” — Andrew Ross Sorkin ([12:42])
• Discussion overlapped with concerns of “de-banking” (J.P. Morgan, January 6th), highlighting how politics now often spill into business/financial realms.

---

3. Washington State Millionaire Income Tax Proposal ([44:00]–[56:41])

The Proposal, the Rationale, and the Pushback

• Washington State is considering a 9.9% income tax on individuals making over $1 million annually—an attempt to align the state with most peer states that already tax high earners. (It is NOT a wealth tax.)
  • “This is an income tax on very wealthy people ... the only people who would pay it are ones who have more than a million dollars in income.” — Jamie Peterson ([46:46])
• Migration Concerns:
  • Peterson downplayed fears that millionaires will flee Washington, noting the state would remain competitive with others and that similar taxes exist elsewhere.
    • “I don't think ... that it would cause many people to think about moving.” ([47:54])
    • “If you have somebody who's thinking about going to Idaho, they have to have more than $1.9 million of income for it to pencil out.” ([48:09])
• Impact on Major Employers:
  • The bill would reduce some corporate taxes; business leaders have been consulted and some support the package, as it would roll back prior increases and help small businesses ([50:31]).
• Spending Cuts as Well:
  • Peterson noted $7 billion in cuts last year and further cost reductions in the works ([51:45]).
• Out-migration Modeling:
  • State revenue estimates “build in an assumption” of some people leaving or tax avoidance, projecting about a 95% collection rate over time ([55:07]).
• Clarification:
  • The so-called “wealth tax” label is a misnomer; the current debate is purely about an income tax ([49:24]–[49:53]).

Notable Exchanges

• Joe Kernan:
  “You're not trying to tax intangible assets at least, right?” ([49:13])
  • “Even you aren't crazy enough to try to do that, are you, Senator?” ([49:25])
• Jamie Peterson:
  “We're a state that has a lot of natural advantages. We don't need to be exceptional in terms of our tax system. And what is really exceptional about our tax system right now is that we don't have any form of income tax at all.” ([49:28])
• Andrew Ross Sorkin:
  “When you do the math on this proposal, do you ... subtract anybody leaving? ... Do you say to yourself, okay, yes, some percentage ... are going to leave as a function of this and we're going to lose x amount of money but we're going to make it up on the other. Explain how you do it.” ([54:40])

---

Memorable Moments & Quotes

• “This is a moment of great uncertainty and volatility, not just for consumers, not just for businesses, but also for our trading partners and for adversaries.”
  — Natasha Sarin, [02:09]

• “If the tariffs were illegally imposed, then did these companies get their money back? And if so, we're talking about $175 billion that would have to be returned.”
  — Stephen Moore, [01:52]

• “Only a stable tariff regime can result in that kind of investment.”
  — Steve Liesman, [30:24]

• “Taxation without representation is so terrifying that this country was founded on the principles that you have to have some sort of deliberative process.”
  — Natasha Sarin, [36:17]

• “This is not a tax on intangible property ... This is an income tax on very wealthy people.”
  — Jamie Peterson, [46:46]

---

Important Timestamps

| Time | Segment | |----------|:---------------------------------------------------------------------------------------| | 01:02 | Show opens; tariffs overturned by Supreme Court | | 01:25 | Complexity and unpredictability for businesses (Steve Liesman) | | 01:52 | Refunds for businesses discussed (Stephen Moore) | | 02:09 | Natasha Sarin on economic uncertainty | | 04:20 | Details on the transition from IEEPA tariffs to Section 301/232 (Jameson Greer) | | 19:13 | Steve Liesman on household impact, inflation, business response to tariffs | | 24:14 | Sorkin & Liesman on the international investment ramifications | | 33:53 | Moore & Sarin in debate: tariffs as tax, Congressional authority | | 36:17 | Sarin: “Taxation without representation is so terrifying that this country was founded…”| | 41:32 | Long-term investment risks for companies, supply chains | | 44:00 | WA State’s millionaire tax proposal introduced | | 46:46 | Peterson: Clarifies it is not a wealth tax | | 48:09 | Out-migration concerns: “they have to have more than $1.9 million ...” | | 50:31 | Impact and negotiations with big corporations | | 54:40 | Sorkin: Do you account for people leaving in your model? |

---

Summary Takeaway

This Squawk Pod episode captured the economic, legal, and political reverberations from the Supreme Court’s blockbuster decision overturning Trump’s tariffs—kicking off a new era of uncertainty where businesses, investors, and foreign governments must recalibrate. With the risk of $175 billion in potential refunds, shifting tariff authorities, and political tensions running high, stability remains elusive. Meanwhile, Washington’s proposed millionaire income tax ignites classic debates over taxation, migration, and the appropriate balance between fiscal competitiveness and public service funding. On a snowy Monday, the U.S. finds itself negotiating not just trade, but its own regulatory, political, and economic identity.

Transcript

[Schwab Announcer]

Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before. Like access to the trade desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy. Gut check. Need assistance? No problem. Get 24. 7 professional answers and live help and access support by phone, email and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn [e-mail] trading Martha listens to her

[Expedia Announcer]

favorite band all the time. In the car, gym, even sleeping. So when they finally went on tour, Martha bundled her flight and hotel on Expedia to see them live. She saved so much she got her seat close enough to actually see and hear them sort of. You were made to scream from the front row. We were made to quietly save you. More Expedia made to travel savings vary and subject to availability. Flight inclusive packages are atoll protected.

[Andrew Ross Sorkin]

Bring in show music please.

[Joe Kernan]

This is Squawkpod and I'm CNBC producer Cameron Costa. On today's episode, Wall street is digesting the Supreme Court decision to overturn President Trump's tariffs.

[Andrew Ross Sorkin]

I think it could actually really stymie investment. That is the fundamental question how the

[Joe Kernan]

changing rules have affected businesses so far with Stage Steve Leesman.

[Steve Liesman]

You must be out of your mind to follow the rules here because it is so complicated, so complex, so changing every day. And this is antithetical to the administration's own central initiative of deregulation and being pro and business friendly.

[Joe Kernan]

And to all the companies who did follow those ever changing rules. What happens now? Trump's former economic adviser Stephen Moore.

[Stephen Moore]

If the tariffs were illegally imposed, then did these companies get their money back? And if so, we're talking about $175 billion that would have to be returned.

[Joe Kernan]

And Yale's Natasha Sarin on America's current economic standing.

[Natasha Sarin]

This is a moment of great uncertainty and volatility, not just for consumers, not just for businesses, but also for our trading partners and for adversaries.

[Joe Kernan]

Then in Washington State, State Senator Jamie Peterson has sponsored.

[Jamie Peterson]

This is not a tax on intangible property, the so called wealth tax that we were considering last year. This is an income tax on very wealthy people.

[Joe Kernan]

Plus, a winter storm blankets the east coast again. And President Trump is calling for the removal of a Netflix board member, Susan rice. It's Monday, February 23rd. A chock full Squawk pod begins right now.

[Andrew Ross Sorkin]

Stand and or buy in 3, 2, 1, 2. Andrew good morning and welcome to Squawk Box right here on cnbc. We are live at the Nasdaq marketsite in Times Square on a very snowy Monday morning. We'll talk about the blizzard in just a second. I'm Andrew Ross Sorkin along with Joe

[Joe Kernan]

Kern and Becky is off coastal winter storm slamming the northeast. More than 40 million Americans under blizzard mornings, 200,000 plus power outages reported. New York City has already seen close to a foot of snow at the southern tip of Manhattan. A lot more I'm hearing from I wasn't there but out in the burbs there are some serious totals. As far as snow, I don't more than a foot, maybe two feet. Mayor Zaran Mamdani announcing a travel ban, closing schools for a snow day for the first time since 2019. East coast airports virtually closed. And according to Flight aware, New York's LaGuardia Airport has canceled 98% of its flights. Boston's local Air Logan Airport 92%. New Yorkers were hoping for some quick melting because that's what we finally got from the last storm was finally starting to go away, but very mushy. But we may be in luck. The temperature is forecast to be above freezing for the next several days, including 40 degrees on Wednesday.

[Andrew Ross Sorkin]

Now to the story of the day, the tariff story. U.S. customs and Border Protection saying it's going to stop collecting tariffs imposed under the International Emergency Economic Powers Act. It's going to start at 12:01 Eastern Time tomorrow. Now, on Friday, the Supreme Court ruled that President Trump's tariffs imposed under that so called IA law were illegal. The president said he would impose a 10% global tariff, which he then upped to a 15% rate a day later. U.S. representative Jameson Greer, trade representative, commenting on how the administration intends to keep its tariff regime in place despite the court ruling.

[Joe Kernan]

There's a 15% tariff now. It's roughly equivalent to the types of tariffs that we had in place under ipa. As this tool expires, I'm going to be conducting Section 301 investigations. The Commerce Department has existing tariffs under Section 232. A lot of tariffs are still in place. The reality is we want to maintain the policy we have, have as much continuity as possible, make sure that business understands this is the, you know, this is the direction we've been going. We're going to continue going this way.

[Andrew Ross Sorkin]

It's unclear when or if American companies would be refunded tariffs they've already paid. Treasury Secretary Scott Besant was asked about that yesterday, but didn't directly answer.

[Steve Liesman]

That's bad framing because the Supreme Court didn't even address that. The Supreme Court remanded it down to a lower court. And, you know, we will follow what they say, but that weeks or months when we hear them. So the Supreme Court did not address refunds.

[Andrew Ross Sorkin]

Following Friday's ruling, the president said on Truth Social he was ashamed of certain members of the Supreme Court. He praised Justice Thomas and Alito and Kavanaugh, but then criticized by name two others he appointed Barrett and Gorsuch and effectively at one point said that, you know, that he was ashamed of them and their families should be ashamed and

[Joe Kernan]

really, really should be interesting to them. Are they sitting in the front row as they do? Who's going and who's not?

[Andrew Ross Sorkin]

They will. He said that they were, quote, hardly invited to the one to the state

[Joe Kernan]

of the one that went the wrong way.

[Andrew Ross Sorkin]

And somebody asked, you know, would they be welcome there? And he said they were. They're hardly invited anyway, basically. And honestly, I don't care if they come or not. But I would say, I mean, on that front, I don't we don't even

[Joe Kernan]

remember was it Obama or Biden where he was saying something and Alita was going, that's no, no, that's not true. The which but which one was it? Do you remember?

[Andrew Ross Sorkin]

I believe you're talking about Obama, but there has been times where, where the president states has been critical of the Supreme Court before. I don't think we've ever been so

[Joe Kernan]

critical on the personal basis like Trump,

[Andrew Ross Sorkin]

obviously, in this way. And I do think the decorum of the court is something is one of the sort of last bastions, I hope, of, of what's left.

[Joe Kernan]

And the court on the left had an approval rating of 10% and you want to put 50, want to put 15 people on the Supreme Court anyway. So if the left suddenly is holding up the Supreme Court as someone that they admire and they don't like that the president is disparaging them. They already hate the Supreme Court. So that but I don't think it

[Andrew Ross Sorkin]

has to be considered in that political context. I think the bigger question well, that's what we're doing.

[Joe Kernan]

That's what we're doing is talking about Trump.

[Andrew Ross Sorkin]

Again, the bigger issue right now is going to be the refunds. So all of these big companies talking about how now you have a short window, by the way, there's a formula to when you actually have to even put in for a refund, first of all, and to whether a company that raised prices will quote, unquote, have standing, whether you're effectively going to have to show losses. And that's going to be a very interesting question mark. And clearly I think the comments that Bessen had made on Friday at the Economic Council in Dallas suggested he doesn't think that companies are going to get anything back and the American public may not get anything back.

[Joe Kernan]

I heard that they're saying the way he described it, I heard someone saying that do countries get tariffs back? And here all along we've been told the countries don't pay any of the tariffs. So what does that mean?

[Andrew Ross Sorkin]

Well, I don't know what that part means but they were talking about countries

[Joe Kernan]

are we are countries owed things for tariffs that they have paid. I guess if they raise prices on their, on their exports then.

[Andrew Ross Sorkin]

Well, I don't know if it's the country that would get the money back I think would be the company. I mean like this was country that

[Joe Kernan]

they were talking about.

[Andrew Ross Sorkin]

Well, here's the bigger issue though.

[Joe Kernan]

Yeah.

[Andrew Ross Sorkin]

The bigger issue is if you're Japan for example, or Indonesia or Malaysia or name a country South Korea that committed to the president they were going to make a massive investment in the United States because they were coerced based on the back of this idea.

[Joe Kernan]

No, I heard him say that we expect all these countries that did these trade deals to follow through on regard

[Andrew Ross Sorkin]

now most of these deals, even though we they were touted by the administration.

[Joe Kernan]

Right. They're not totally done.

[Andrew Ross Sorkin]

So many of them are not done to begin with because they require authorization oftentimes by a whole other legislative branch

[Joe Kernan]

in the foreign country, in the foreign countries.

[Andrew Ross Sorkin]

And if you read through some of the press in the international press over the weekend in some of these countries, I mean the idea that some of these countries are going to pursue and follow through with those commitments seems very hard to believe because the citizenry is looking at this saying I don't understand. You negotiated with these people based on this assumption. Their own courts are saying this is illegal. How is this even happening?

[Joe Kernan]

I would think that everybody that doesn't like Trump the tariffs would be excited. But they're obviously they're not going away. I don't know how they're going to be back but or whether they'll be back, whether how long they could be backward. It's 150 days. Well, it seems, you know, isn't it 150 days?

[Andrew Ross Sorkin]

It's 150 days. You get through the summer.

[Joe Kernan]

Right.

[Andrew Ross Sorkin]

By the way, it's now a blanket situation.

[Joe Kernan]

Wouldn't Congress have to do something?

[Andrew Ross Sorkin]

Well, no, no. Here's what's going to happen, they'd have to okay to go the next 150 days. This 50% will be here, which is basically roughly in line with where it is. But by the way, countries like Britain, which were at a lower rate, are now going to be paying a higher rate after they made all these deals. So all of these deals have been completely gone back on just by default of this, this situation and the ruling. So then you're going to have Jameson Greer go on an individual basis. And if he, look, you can actually implant tariffs legally, I believe if you do investigations and you can argue that this is not fair and this on a very specific, either company by company, industry by industry or country basis for certain things. And so likely what they're going to do is try to do that and run that clock for the next, call it two and a half years. But that makes it very difficult if you're an American company or international company, to decide where you actually are going to put your supply chain. Because what's going to happen at the end of this period and how different is it going to be for the next couple of years? I think it could actually really stymie investment. That is the fundamental question.

[Joe Kernan]

Well, thank you for that because I was wondering what it was, what was President Trump calling on Netflix to fire a board member and former Biden administration official Susan Rice. In a post on Truth Social, the president said Netflix should get rid of Rice or in his words, pay the consequences. During a podcast last week, Rice said that things wouldn't end well for companies, news organizations and law firms that cave to President Trump's demands in his second term. She added that when Democrats regained power in Washington, she didn't think that they would forgive companies and Netflix flicks spokesperson declined and comment on the president's remarks. But Ted Sarandos basically brushed them off. He's over in London. Said that President Trump likes to say do a lot of things on social media, but this is a business matter and not a political matter. That must have thrown a chill into you a little bit when she said some of those things, because we don't, you know, maybe it started in one administration, another administration does. Does the same thing. Then the next one goes back and says, we're going to get you for what you did. But since we don't like anyone to do it, I know that as an objective person, you don't think it's a good thing for her to be saying that there will be hell to pay for these companies.

[Andrew Ross Sorkin]

I think it's terrible. I think it's terrible.

[Joe Kernan]

I mean, I gotta say, I got a little bit scared.

[Andrew Ross Sorkin]

I don't think it's good for her to say. I think it's actually a very bad thing.

[Joe Kernan]

Very good. That's all I. That's all I wondered because I know how you take a stand on this.

[Andrew Ross Sorkin]

I think it's bad for her to say, okay. And I also hope that if in fact, this transaction ultimately gets in front of the Department of Justice, I know that the president doesn't have. That was the sort of reputation people immediately thought against Rice on Twitter.

[Joe Kernan]

So people are saying, are you crazy? In the middle of all this, you're saying this stuff as if it could come back to haunt Netflix that a board member was saying those things when it's trying to do this acquisition.

[Andrew Ross Sorkin]

But you're saying that about the president.

[Joe Kernan]

No, I'm saying that everywhere I saw that, people immediately were jumping to the conclusion that it was a very bad move because it could cause problems with the administration in allowing.

[Andrew Ross Sorkin]

There's two issues. I disagree with what she said and I think the. On the merits of what she said, she should.

[Joe Kernan]

But it shouldn't have any. I understand. It shouldn't have anything to do with the.

[Andrew Ross Sorkin]

But I also.

[Joe Kernan]

That's what Sarandos just said.

[Andrew Ross Sorkin]

She so chose to say those things that. That should not impact whether this transaction is approved or not.

[Joe Kernan]

Exactly. That's why I just read that Sarando said.

[Andrew Ross Sorkin]

No, I'm sure that that's what Sarando said, but Sarando was saying that I believe in part to try to tamp down the potential that the president would

[Joe Kernan]

try to block the deal because already there were. There's musings that. He's always liked the Ellison.

[Andrew Ross Sorkin]

The Ellison's better.

[Joe Kernan]

He's just been saying, I'm not going to do anything about it. But people didn't really, you know. Well, we'll see. But it got pretty interesting with it. But that.

[Andrew Ross Sorkin]

What's that?

[Joe Kernan]

It just is. I mean, do 77 million people that voted for Trump have to worry

[Andrew Ross Sorkin]

about.

[Joe Kernan]

Which part Susan Royce said there are. She's never gotten a vote by anybody. She's never been elected to anything. Anybody that has, like, taken up. Taken up with this bad orange man could go to, you know, I mean, it sounded really strange. Talk about fascism.

[Andrew Ross Sorkin]

No, no, no. Well, I'm not so sure about that.

[Joe Kernan]

Orwell.

[Andrew Ross Sorkin]

No, no. I think there's a.

[Joe Kernan]

What was she saying?

[Andrew Ross Sorkin]

Take it out of Susan Rice's mouth and put it in Jamie Dimon's mouth. One of the things that Jamie has said repeatedly is this idea that he fears that companies that make deals, specific kinds of deals with this administration that potentially could look like some form of corruption or bribery or something else, will be prosecuted by the next administration. Now, I think that unto itself is a uniquely interesting thing. But the point is, did it really

[Joe Kernan]

come out that JP Morgan debanked? Did at all come out? Didn't the New York Times report on that? That there was that. Did that happen? Because I was seeing that on social media too.

[Andrew Ross Sorkin]

Well, look, the president is suing J.P. morgan over what he argues is being debanked after. Now, the reason that would tell you that he was debunked or his family was debunked or whatever it was was related to January6.

[Joe Kernan]

Right.

[Andrew Ross Sorkin]

Because of the regulations that the government has in place that, that actually forces the banks. This is the argument J.P. morgan would make, right? To debank certain people who create, who could create genuine risk to the bank. That is the argument. And if you looked at January six at that time, that's what was taking place.

[Joe Kernan]

So they did debate.

[Andrew Ross Sorkin]

And one of the things that Jamie Dimon has said, I think for the last decade or more is that the rules should be changed. He's been arguing about some of these debanking rules, but these, these rules come from a combination of the Federal Reserve and from the Treasury.

[Joe Kernan]

I have to worry about being debanked. Now. Will Susan Rice to bank me? Because I've.

[Andrew Ross Sorkin]

Susan Rice doesn't work at a bank.

[Joe Kernan]

But you're sure I don't. There's nothing for me to worry about.

[Andrew Ross Sorkin]

I mean, you got to worry. I'm going to debunk you. Cheese will be next.

[Joe Kernan]

Coming up on squawk pod tariffs overturned and the future in flux. Economist Natasha Sarin.

[Natasha Sarin]

The pre Supreme Court ruling was around 16%. The effective tariff rate calculated by my colleagues at the budget lab at Yale says It's now about 13.15.7.

[Joe Kernan]

And conservative economist Stephen Moore.

[Stephen Moore]

The court has basically taken an arrow out of the quiver of Trump's negotiating strategy. And again, as someone who's not a fan of terrorists, I am a fan

[Joe Kernan]

of these trade deals, refunds and geopolitics right after this break.

[Expedia Announcer]

Olivia loves a challenge. It's why she lifts heavy weights and likes complicated recipes. But for booking her trip to Paris, Olivia chose the easy way. With Expedia, she bundled her flight with a hotel to save more. Of course, she still climbed all 674 steps to the top of the Eiffel Tower. You were made to take the easy route. We were made to easily package your trip Expedia made to travel flight inclusive packages are atoll protected.

[Schwab Announcer]

Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before, like access to the trade desktop. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy. Gut check. Need assistance? No problem. Get 24. 7 professional answers and live help and access support by phone, email and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn [e-mail] trading thy ticket lady Jennifer of Coolidge.

[Natasha Sarin]

Well, many thanks good sir.

[Joe Kernan]

Here is my Discover card. They accept Discover at Renaissance Fairs. Yeah they do here. Discover is accepted at the places I love to shop.

[Andrew Ross Sorkin]

Get it with the Times. With the Times.

[Joe Kernan]

You're playing the loot. Yeah, and it sounds pretty good, right?

[Steve Liesman]

Discover is accepted at 99% of places that take credit cards nationwide, based on

[Andrew Ross Sorkin]

the February 2025 Nielsen report. This is Squawk Pod Wall street trying to assess the potential economic impact of the tariffs that are going away and the tariffs that are maybe staying. And on the way. Senior economics reporter Steve Liesman joins us with the latest. What are you hearing Steve?

[Steve Liesman]

Well, it was an interesting weekend talking to lawyers and trade experts and economists, but with the end of emergency tariffs but the beginning of a series of new ones, economists expect expect pretty much somewhat less inflation and a reduced hit to growth this year, but the impact will still be there. There will be greater uncertainty as we wait for how the administration ultimately fashions a new set of import tax measures. Erica York from the Tax foundation, she wrote this weekend the Supreme Court ruling was welcome news, but the economic pain is far from over. The Trump tariffs amounted to an average tax increase per U.S. household of $1,000 in 2025. Now, with the IEPA tariffs being ruled illegal, the president's remaining new tariffs will result in a household burden of $700 in 2026. Treasury Secretary Scott Base Besant late on Friday said the administration plans to raise as much revenue through new tariffs as it did with old tariffs. But most think the effort will not quite succeed. Goldman saying the effective tariff rate will fall to 9% from 10%, saying 60 to 70% of the tariff prices have already been passed through the consumer, raising core inflation by about 0.7%. But economists don't think there's Goldman doesn't think there's much more left to pass through. Economists also don't see prices rolling back. Barclays writing over the weekend quote, we doubt that businesses which recently raised their prices due to tariffs will lower them back. They would likely wait for more clarity on the future tariff rates. And it's the lack of clarity that may take the biggest economic toll. Businesses now brace for a renewed period of uncertainty over what tariffs will be in place, over what, along with, of course, potential legal challenges to these new authorities. Separately, NEC Director Kevin Hassett has publicly apologized for comments made on CNBC last week, where he called for New York Fed researchers to be disciplined after they found 90% of the tariffs were paid by US consumers and businesses. Hassett, writing to Larry Kutlikoff, an economist, he wrote, I regret suggesting the authors should be disciplined for their research. Indeed, I retract that suggestion. And the officers of this study are all excellent economists. We differ strongly on this particular paper, but I did not mean to impugn their excellent reputations and regret my choice of words. As for the Fed, it's hard to imagine them doing anything but taking the administration at their word that they intend to replace the tariffs one for one. So the policy outlook unlikely to change when it comes to interest rates. And Andrew, this could be another round of legal challenges here because this section 122, as you know, that calls for the use of declaring a balance of payments problem or crisis is something that's being disputed by a lot of people I'm talking to.

[Andrew Ross Sorkin]

Look, even Neil Katya, who was the lawyer who argued this case in front of the Supreme Court and won, meaning just this tariff case we're talking about, he made the point that the Department of Justice in its own argument effectively says that that Section 122 might not be a path to doing what they're doing. So I think this is going to raise some really interesting questions. The biggie that I've been talking about all morning, Steve, that I wonder where you land on, is not so much about the refunds or what companies ultimately do or at least do in the short term, which is probably not much as they wait for all this to play out, is what countries that made large commitments to invest in the United States ultimately do, given that so many of them remain unfulfilled and in so many cases actually not just remain unfulfilled, but remain unapproved by their own legislatures in various countries around the world.

[Steve Liesman]

Well, I think that's another piece of the uncertainty, Andrew. We're going to go back to the drawing board perhaps on some of these negotiations. I understand that Europe is going to vote this morning to, to just stop the negotiations or the approval of the European US Trade pact. I think it changes the essentially the negotiation and the leverage of the President. What's interesting to me, Andrew, is this kind of ties back. The President is saying that there are investors willing to put or countries willing to put trillions of dollars into the country. Now he goes to go to section 122 which suggests a balance of payment problems. So I talked to people from the bank for International Settlements last night or former people from there and a balance of payments problem is when foreigners are withdrawing their money. You have a run on the currency, you have a surge in interest rates, you have all kinds of problems that we don't have if the President is right and people want to put trillions into the country. So it really all ties together that if these investments are being made as the President claims and I think some of them are actual and some of them are exaggerated in hyperbole, but if they're being made, it's very hard to make the claim of having a balance of payments problem.

[Andrew Ross Sorkin]

And that's going to be a very, very interesting issue. Having said all of that, you know the other leverage piece of this which we've also talked about a little bit this morning, Steve, is not simply using tariffs. So that was sort of the President's favorite cudgel is going to be the defense issue which is, you know, you think about a Taiwan or you think about parts of Europe and NATO and the like, there is part of an issue about whether some of these countries and by the way some companies that may not even be seeking refunds, for example, because they are worried about retribution in some other way.

[Steve Liesman]

Yeah, I mean I heard you, I heard you talk about that. I think all of that is accurate. I think that's part of the negotiation, part of the relationship we have. But we start at another place here and these section 122 tariffs, I'm sorry to keep coming back to them but they have this 150 day limit on them. So now you talk to a person on the other side of the, of the negotiating table that has a different set of leverage and that leverage is one that is potentially limited. And again coming back to this 122 thing, I keep talking to people and they say they don't know. If Congress does not improve approved to extend them at the 150 day mark, it's possible the administration could come right back and declare the balance of payments emergency once again. So it could go on potentially forever. So I wish Andrew, that the administration would figure out or Would it would incorporate in its, in its, in its policies the uncertainty that's created for business here that you want to be able to order stuff from overseas. Tell me what the price is, tell me what the tariff is, and I can go about my business. Now, I think there's another round of potentially debilitating uncertainty here.

[Andrew Ross Sorkin]

And by the way, just one piece of uncertainty that I think doesn't seem to be on the table is the idea that Congress is not going to at least this is my impression. But maybe you think politically it's different that when these 150 days are over, I mean, part of what the Supreme Court effectively said was Congress, it should be your decision to make and therefore that Congress would effectively have to approve something after 150 days. If you wanted to use, you know, either section 122 or IPA or something else in this context, politically, especially ahead of these midterms, that does not seem to be, you know, tariffs do not seem to be a popular thing in this country.

[Steve Liesman]

Right. But the problem becomes, again, Andrew, can the administration just declare it again? And by the way, there's a whole bunch of other declarations that are coming or may have already been made in section 232, sections 301. They're going to be using a whole range of, by the way, Congress has ceded a lot of tariff, tariff authority to Congress. It's just what the Supreme Court declared is they couldn't use this particular IPA tariffs in this case. But there are many, many ways Congress, the administration, can implement tariffs. It appears the administration will be using those measures. And we're going to have to sit here and wait for each declaration and how it does it. It looks like they carved out some of the initial exemptions that were in the IPA tariffs and those Passover into the Section 122 tariffs. We'll just have to wait and see. And then we'll do more and more of this analysis to try to figure out what the ultimate impact is on inflation and growth. Andrew?

[Joe Kernan]

I mean, we're still waiting, Stephen. And you know, there are a lot of people that think that the axe will eventually fall on inflation and everything else. But I just, you know, debilitating uncertainty will continue. I don't think the, the administration would use the word debilitating uncertainty for American business, that we just went through an amazing earnings season, the market's at new highs. It just hasn't. Maybe we're waiting for Godot. Maybe it happens. But I just, I don't, I don't, I just don't feel the debilitating uncertainty that, that you're saying that companies have felt since Liberation Day. Maybe for the first week there is debilitating uncertainty and then it all reversed itself. So it has to get a lot worse than what it's been up to this point.

[Andrew Ross Sorkin]

I know a number of CEOs who think that they made a big M stake, by the way, already with some of the supply chain stuff.

[Joe Kernan]

Okay. I'm just saying that market

[Steve Liesman]

from the

[Joe Kernan]

stock market, not come from the stock

[Steve Liesman]

market point of view.

[Joe Kernan]

Earnings.

[Steve Liesman]

Well, that is the stock market, right?

[Joe Kernan]

Not necessarily.

[Steve Liesman]

It's what I'm.

[Joe Kernan]

Well, you just said the debilitating uncertainty for companies. Where, where are you seeing it in either the stock market or the company's results?

[Steve Liesman]

Well, when you talk to people, Joe, who talk about the idea of trying to program their systems. Joe, we've had intraday changes in tariffs. We have had a period of time where the uncertainty about what the cost is going to be of fairly critical inputs. They have had exemptions.

[Joe Kernan]

I understand, Steve.

[Steve Liesman]

You know what administration, we'll call up

[Joe Kernan]

Santelli and get call up and Santelli, then it'll be fair. You, me and Santella against, against you. How will that be better? We gotta get, we gotta move on.

[Andrew Ross Sorkin]

This is the biggest story of the year, possibly of the decade. No, no, but I'm saying the tariff story, broadly speaking, what this president has done with tariffs has changed the entire global trade landscape.

[Joe Kernan]

Well, he did it in his first administration and then Biden left him on. And now this is a.

[Andrew Ross Sorkin]

Okay, so the thing that I'm still just trying to understand that I wanted to go back to Steve about is the question long term. Let's say you get past these 150 days, let's say you're able to implement other tariffs while this administration is. This administration. Do you think, and this is the question I was hearing from CEOs about, which was, yes, their view is that the tariffs of some form will stay here possibly for the next two, two and a half years. But that's different than being here for the next 10 years in terms of making big infrastructure investments and some of the sort of long term, long term investments that they're going to be making. And my question to Steve is whether you're hearing either the same thing or how you think that changes the dynamic.

[Steve Liesman]

Well, it's. Well, first of all, I want to go back to what Joe is saying. It is true that not every company has been had debilitating uncertainty. That is true. It is certainly more True. For those involved in import importing of products and where imports are essential. The president's policies are based on, in part, a revenue issue. Right. When they said we're going to really replace the revenue, they didn't say we're going to replace the reasons for the thing being there. We're going to place the revenue. There's a revenue component. There's also this component where the president is hoping to bring in manufacturing into the United States. Only a stable tariff regime can result in that kind of investment. And if you might recall, Joe, from the very beginning of this, I said if the president wants to put tariffs on for that reason, he must go to Congress to create a more stable regime. And it was not a question of whether or not tariffs good, tariffs bad. But you want people to make investment, you got to have stability.

[Joe Kernan]

So because the next administration might not care, I understand that the president's own plans. Right. You, I mean that's a perfect world. Obviously you're hoping for because administrations change and we get whipsaw, businesses get whipsawed back and forth on all kinds of things and not just trade and tariffs, but regulation and everything else.

[Steve Liesman]

This was supposed to be an administration that was going to come in and be very business friendly. And they have been in the sense of this accelerated depreciation and other deregulatory aspects of We've had this issue. We had Scott Lince, come on. I don't remember if you were there from the Cato Institute who showed the graph of if you're trying to follow the law and pay these tariffs that you must be out of your mind to follow the rules here because it is so complicated, so complex, so changing every day. And this is antithetical to the administration's own central initiative of deregulation and being pro and business friendly.

[Joe Kernan]

Right. That's mercurial. I mean, I've actually, when I've talked to some of the president's biggest supporters, I've said, well, what about this, what about this, what about this? And they always say sort of the same thing, Steve. You know what they say, Joe? That's how he rolls. And I think when they say I go, yes, that is true. That's how he rolls. President Pre preparing to deliver the state of the Union tomorrow night. And the state of the economy will be front and center. Probably get some comments on the Supreme Court ruling as well. I bet you you might might get a glimpse of some famous hockey players too.

[Steve Liesman]

Maybe.

[Joe Kernan]

I don't know. I'm just thinking. Joining us now, former Trump Economic adviser and co founder of Unleashed Prosperity, Stephen Moore and Natasha Sarin, Yale University Law School professor. I was joking a little bit because, Stephen, you've never been a fan of tariffs. So I said, this can be some debate, talking about tariffs when both people are, like, finishing each other's sentences. You at least concede, Stephen, that it might tie Trump's hands in negotiating better trade deals and forcing other countries to reduce their tariffs. But you've always thought of it as a tax, I think, on. On. On companies and consumers as far as tariffs go.

[Stephen Moore]

Well, that's exactly right, Joe. And I've always been kind of conflicted on this because on the one hand, I don't like taxes and tariffs, and. And I do think that the Supreme Court has made the right decision in basically saying that these kinds of decisions really have to pass through the House of Representatives in Congress. This Constitution is pretty clear on that. On the other hand, the. The court has basically taken an arrow out of the quiver of Trump's trading strategy. And again, as someone who's not a fan of terrorists, I am a fan of these terrorists. These trade deals that Trump has brought home, that the trade deals with China, the trade deals with. With Canada, Mexico, Europe, he has forced other countries to lower their tariffs and our goods, and now he's. He's sort of lost that negotiating tactic. So that's. I think, one of the reasons Trump is. Was so angry about this decision.

[Joe Kernan]

And you do make one point that I think everyone could identify with a little bit. And then we'll get to Natasha. Steve, and if you do view tariffs as taxation, as a tax, your point is, imagine what would happen if a. And you say a Kamala Harris, President. Kamala Harris, President Gavin Newsom, President, AOC Were to just tax anything he or she wanted without any congressional approval. That's nightmarish. That's a hellish scenario by any means. Maybe Natasha might like it. We'll find out. But that's a scary scenario. Is it?

[Stephen Moore]

That's one reason that conservatives and free marketeers should probably be cheering this Supreme Court decision, because no president, not this president or an AOC or Kamala Harris, should have the authority to say, well, we have an emergency here, so we're gonna raise taxes without any approval from Congress. And so, look, this simply means that Congress is gonna have to do their job. Have they voted, Joe, up or down on any of this? I mean, the Congress is sort of the villain here. They've done nothing on these. They've never even taken a vote.

[Joe Kernan]

Yeah, well, they Got an election every two years in the House, Steven, that no one wants. I can't imagine. Natasha, take it away. And I know you always come on and you know you're going to needle you a little bit, but you smile when I do. I appreciate that.

[Natasha Sarin]

Well, I have to say I agree with a lot of what you and Steven are saying. I think the idea of taxation without representation is so terrifying that this country was founded on the principles that you have to have some sort of deliberative process that goes through Congress that determines the power to tax and spend. And so I too was heartened by the Supreme Court's decision on Friday. The thing that I think is challenging and Stephen started to get at a little bit of this with respect to our negotiating posture in other countries. I think we disagree on how positively we view these trade deals, but I suspect we agree on the following. Effective tariff rates today relative to where they were Friday morning before the Premier are actually in kind of a similar place. So the pre Supreme Court ruling was around 16%. The effective tariff rate calculated by my colleagues at the budget lab at Yale says It's now about 13.7. But there is so much uncertainty and volatility about even the legal authority that's being deployed to effectuate these new tariffs. And they're temporary for 150 days, and then they do require congressional authorization. And if you're sort of an ally or an adversary looking at the United States right now, and if you've been looking at them for something over the last year, I suspect. I suspect you're kind of wondering about the extent to which these types of authorities that the President is trying to levy are ultimately going to be supported by the Supreme Court. And I suspect this isn't the last time we're going to see legal challenges in this dimension. So I just think that this is a moment of great uncertainty and volatility, not just for consumers, not just for businesses, but also for our trading partners and for adversaries like China that are looking at the US In a weakened position.

[Joe Kernan]

Natasha, right out of the box you said, this is terrifying. Terrifying. I'm gonna start using that on Leaseman. He's been terrified since Liberation Day. Tariff. Get it, Steve.

[Steve Liesman]

Huh?

[Natasha Sarin]

I do what I can for you, Joe.

[Joe Kernan]

You went right through it. Natasha, I don't think. But I was listening. Oh, my God. She just said it really is terrifying.

[Stephen Moore]

Are we giving away.

[Joe Kernan]

Go ahead, C. I was just going

[Stephen Moore]

to make, you know, an important point, which is this is, I think, the word, the word that the court made was that this is going to be very complicated and confusing about where we head from from here on in. Now, Trump obviously came out with that temporary tariff was a 10 or 15% across the board yesterday. And that that would be, I think only for a few months. But the big question that I'm being asked by all businesses, merchants, ret manufacturers, will they be repaid the money that they, that they paid in the tariff? In other words, if the tariffs were illegally imposed, then do these countries get their money, these companies get their money back and if so, we're talking about $175 billion that would have to be returned. I don't know the answer to this, but I know it's going to be a big, big issue that's debated it.

[Natasha Sarin]

Yeah. I think the court called it, Stephen, a mess both in oral argument and Justice Kavanaugh on dissent. Right. Trying to think through exactly what process is going to be used. And the decision says nothing about the refunds. And so it's really an issue that's been left.

[Andrew Ross Sorkin]

Natasha, I think one of the big questions now, putting aside what you think companies ultimately do is all of these unfulfilled commitments that countries have made to the United States in terms of investments here, where you think that heads what kind of leverage or not, you think the president has some of these commitments effectively require foreign legislatures to approve them, many of which have not thus far. You read some of the international press in some of these countries now and they're saying, you know, we were coerced into these deals that we shouldn't have been making and maybe we're not going to now do them. How do you think that all plays out? And what kind of other levers do you think the US has? Whether it's about defense, we think about Taiwan and other things that may, that may pressure them to continue this path.

[Natasha Sarin]

Yeah. And you saw the Europeans over the course of the weekend making the point that this, in fact also using the terminology that the tariff uncertainty has created a mess with respect to trying to think about how even realistic it is that the United States is going to be able to make the kind of commitments and threats that they've been levying in the course of these trade negotiations. And so I think the thing is, Andrew, it has always been very legally questionable and dubious that the president was able to effectuate these kinds of across the board tariffs, which as Stephen points out, are taxes or taxes on businesses and consumers with the stroke of a pen and changing them so dramatically. By my count, the effective tariff rate has changed on some 60 plus days so far in this administration. And so I think they were always pretty legally dubious. I suspect the nature of how other countries were looking at Trump was not through the lens of how likely it was the Supreme Court was going to uphold these tariffs, but instead through the lens of trying to appease and work with the United States, given their importance in the world.

[Andrew Ross Sorkin]

But this gets to the question then, long term, Stephen, maybe you can speak as long term how countries and companies invest or not, either in the US or in these new supply chains, or do they slow roll this whole situation, say, you know what, I don't know what's going to happen over the next two and a half years. I was thinking about this, but maybe I'll see where the world goes afterwards. And if that's the case, that actually is not a good result in many ways because you won't necessarily get that investment.

[Stephen Moore]

Yeah, you need predictability and you need certainty. And we don't, needless to say, we don't have that right now. But one of the things, look, I'm not a fan of the terrorists, but as I said earlier, I think Trump is really recognized something that previous presidents haven't, which is that the United States is in a unique position in the sense that every other country in the world must trade with the United States. We're the alpha male economy. We're the hub of the world economy. And what Trump did, which I think is, was virtuous actually, is to say, look, you have to trade with us. You have your, your stakes are higher here than ours. You have to start giving us a better deal, to use a term that Trump has used, rip off. A lot of these countries have been ripping off the United States by charging us higher tariffs than we charge them. And to some extent, what Trump is basically saying is, look, we want a level playing field. And what's wrong with that?

[Natasha Sarin]

Yeah, Stephen, that's actually not what these trade deals are doing. I mean, what can you articulate and as to something that the United States has gotten out of them? And I think Andrew's point is a really important one, which is the type of volatility and uncertainty and lack of predictability that doesn't just go away. Like, the world looks less stable in the United States, looks less stable as a trading partner. And that's here with us for some time going forward. And as investors are trying to make choices about where to spend resources, they're looking at Europe, they're looking at Japan in ways that they wouldn't have been 16 months ago or 13 months ago precisely because of this volatility. And I think that's a really unfortunate and long term, longer term consequence for the United States going forward.

[Joe Kernan]

Okay, I want to thank you.

[Stephen Moore]

Talk about investors, but what about our manufacturers, our farmers, our dairy farmers who've been really iced out?

[Joe Kernan]

Well, it takes time. Takes time, but right so far. All right, thanks, Natasha. Alpha person, you get Stephen. Alpha person, man. We keep inviting you on, but you got to get it together. But thank you, Stephen. Thanks, Natasha.

Coming up on Squawk Pod, will a new wealth tax proposal in Washington state have executives of three iconic corporations, Microsoft, Amazon and Starbucks thinking about leaving? We'll talk to the state representative trying to make this tax a reality right after this. It's Jamie Peterson.

[Jamie Peterson]

If we pass the bill, it will make it much more like most of our peer states and I don't think therefore that it would cause many people to think about moving.

[Schwab Announcer]

Trading at Schwab is powered by Ameritrade giving you even more specialized support than ever before like access to the trade desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Need assistance? No problem. Get 24. 7 professional answers and live help and access support by phone, email and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn [e-mail] trading packages by Expedia.

[Expedia Announcer]

You were made to occasionally take the hard route to the top of the Eiffel Tower. We were made to easily bundle your trip Expedia made to travel flight inclusive packages are ator protected.

[Joe Kernan]

The Jack Welch Management Institute at Strayer University helps you go from I know the way to I've arrived with our top 10 ranked online MBA. Gain skills you can learn today and apply tomorrow. Get ready to go from make it happen to made it happen and keep striving. Visit strayer.edu Jack WelchMBA to learn more. Strayer University is certified to operate in Virginia by chevin at many campuses including at 2121 15th Street north in Arlington, Virginia. Welcome back to Squawk Pod.

[Andrew Ross Sorkin]

You are watching the one and only Squawk box on CNBC on this very blizzard day here in New York City Times Square. I'm Andrew Ross Sorkin along with Joe Kern and Becky is off. Meantime, the state of Washington is considering a nearly 10% tax on the state's millionaires. A proposal has already passed the of state and joining us right now is the prime sponsor of that bill, Washington State Senator Jamie Peterson, good morning to you. This is becoming a national topic as other states like California, New York and others have talked about wealth taxes and there's been a bunch of people potentially moving from these states. And I'd start with just the very question to you, which is how concerned are you and how much do you worry that if you put these taxes in place that some of the wealthiest in your state who work at places like Amazon and Microsoft and Starbucks and others are going to leave?

[Jamie Peterson]

Yeah. So let's be really clear about what we're talking about. This is not a tax on intangible property, the so called wealth tax that we were considering last year. This is an income tax on very wealthy people. So people who have more than a million dollars of income each year and the tax rate that's proposed, which is 9.9%, is actually lower than in most other states. So there are 41 states at this point that have some form of personal income tax. This would be a personal income tax that has $1 million standard deduction so that the only people who would pay it are ones who have more than a million dollars in income. So I guess the, so what I draw from all of that is that our tax system is unusual, exceptional right now in the sense that it does not tax income at all. What would, if we pass the bill, it will make it much more like most of our peer states. And I don't think therefore that it would cause many people to think about moving.

[Andrew Ross Sorkin]

I don't, I don't, I don't disagree with you that right now that tax does not exist, exist. It's just that the delta is so high. You are not concerned that there are people who would leave the state and try to go to other states with lower taxes and therefore what happens to your revenue base?

[Jamie Peterson]

Well, look, if you have somebody, for example, who's thinking about going to Idaho, they have to have more than $1.9 million of income for it to pencil out.

[Joe Kernan]

Right.

[Jamie Peterson]

Because the amount there is a 4.4% tax, but from $1. So, you know, if you go to Oregon or California or Hawaii or most of the other jurisdictions that we tend to compete for talent with, the tax is actually higher on that level of income and they have tax brackets that are lower than a million dollars. So it is true that if you have somebody who really wants to move to Texas or Florida or one of the other non income states, then they could choose to do that. But I think many of those people have probably already left for other reasons.

[Joe Kernan]

I Think New Jersey has this already, right? Something close to it. This is not a, I don't know why we keep calling it a wealth tax. So you said that right at the top. This is not a wealth tax, is it? This is an income tax.

[Steve Liesman]

Okay.

[Joe Kernan]

You know, that takes away all the really potent ammunition for all the questions. So, so I mean, it might be bad, but it's not. You're not trying to tax intangible assets at least, right?

[Jamie Peterson]

We are not trying to do that.

[Joe Kernan]

Even you aren't crazy enough to try to do that, are you? Senator?

[Jamie Peterson]

I think, you know, I think one of the big lessons that I've had over this process is that we, we're a state that has a lot of natural advantages. We don't need to be exceptional in terms of our tax system. And what is really exceptional about our tax system right now is that we don't have any form of income tax tax at all. We rely primarily on sales taxes to fund government services.

[Andrew Ross Sorkin]

Am I wrong in understanding at the same time you want to increase corporate taxes though?

[Jamie Peterson]

No, actually the proposal will decrease corporate taxes both for large businesses, rolling back tax that we had increased last year and then also probably more importantly for small businesses. We would increase the small business credit so that 70% of businesses in the state would no longer pay any business taxes at all.

[Andrew Ross Sorkin]

But what would be the biggest, the impact on the biggest companies in the state? And I'm thinking about the Amazons, the Microsoft's, the Starbucks is in the like.

[Jamie Peterson]

Yes. So we, we have worked closely with a group called the Washington Roundtable, which includes most of the largest businesses in the state state in developing the proposal. And the proposal right now includes their top two priorities. Number one, reducing that what's called business and occupation tax surcharge of a half a point on gross receipts for businesses that have over $250 million in revenue. We would accelerate the sunset date for that by one year and then we would also roll back the sales tax on services that we had started charging last year as part of our, as part of our budget deal. So for, you know, I think the business community, you know, I won't speak for them, you have to talk to them directly. But I think the business community has been a participant all along the way in the development of this process and many of them view it as preferable to charging higher business taxes.

[Andrew Ross Sorkin]

Invariably there are going to be some who say you don't need to be raising more money, you need to be cutting spending. What do you say to that?

[Jamie Peterson]

Well, we are Cutting spending, too. You know, last year in our budget process, we cut about $7 billion of spending. And this year in the budget that my Ways and Means chair just rolled out, we are going to be reducing about $1 billion of additional spending over the next four years from what our, our budget had last year. You know, the, the reality is that we are sort of in a, in a position where labor and other costs for public services, education for health care are going up. We've got a federal government that is pushing more costs onto us, including

[Joe Kernan]

we're

[Jamie Peterson]

going to have to spend something like $370 million in IT costs over the next three years to implement a system that will kick more people off of food and health care benefits, which we don't want to do.

[Andrew Ross Sorkin]

Right.

[Jamie Peterson]

But that'll be a condition for us to, to receive federal assistance.

[Andrew Ross Sorkin]

Center Washington Let me ask you just a slightly different question, and maybe it's a philosophical one. And there have been folks who've obviously already left your state, like Jeff Bezos and the like, who moved to Miami. But you know, oftentimes, and here we are in New York, the mayor here wants to raise taxes on the wealthy. And we often look at the number of how many people left the state. But one of the things that a lot of people don't do is say, did they come to the state? Would have they come to the state otherwise? And I think about a firm like J.P. morgan, which, which is based here in New York City but now has more employees, I believe, in the state of Texas than they do here. And so when you think about an Amazon or a Starbucks or Microsoft or any or anyplace else, you say to yourself, well, it's not so much simply that people leave the state so much as what does it mean for people coming to the state. And clearly your tax rate, at least in the past, was one of the incentives that I think led people to come to your state.

[Jamie Peterson]

Yes. So look, we're talking about a tax that would be paid by something in the neighborhood of 21,000, I think is the estimate out of 8 million people. And you know, it's going to raise a pretty significant amount of money. The projections are about three, three and a half billion dollars a year, which will help us to be able to fund public schools, to fund health care. I think that the people who are thinking about where to come and it's important to point out that like the U HAUL data actually show that Washington is one of the states into which people are really coming right now. The, the, that data Suggests that people want good public services and the quality of life that we have here. I don't think that it's all about taxes and frankly I don't think that, that it's going to have a significant effect on.

[Andrew Ross Sorkin]

And final question to you, which is when you do the math on this proposal, do you, do you subtract anybody leaving? So when you, when you do the modeling for this, I'm always curious, do you say to yourself, okay, yes, some percentage of those 21,000 people that you say are going to get hit with this tax are going to leave as a function of this and we're going to lose, lose x amount of money but we're going to make it up on the other. Explain how you do it.

[Jamie Peterson]

Yeah. So the Department of Revenue does all of that work. I'm a lawyer, not an economist. But they assume in the first year that we'll have about 90% collection rate and then in ongoing about 95%. So there is built in an assumption either of tax avoidance or you know, by people leaving or not paying. So that, that is built into the assumptions that they have.

[Joe Kernan]

Senator program, is there an actual wealth tax being proposed in Washington State at this point?

[Jamie Peterson]

There was a bill filed to do that, but that is not what we're moving.

[Joe Kernan]

No, I know just the way we intro. I mean that almost it's mind boggling to say that this is what considered a 10% tax on millionaires. It's like that sounds like a 10% wealth tax on a millionaire when in fact in New Jersey and I live in New Jersey and I'm not saying this affected me. But Murphy, on anyone who made between 1 million and 5 million dollars a year, he went to 10 and 3 quarters the marginal rate.

[Andrew Ross Sorkin]

So you think this is a good idea?

[Joe Kernan]

No, I'm just. He loaned me into a false. He's speaking very reasonably and it's not nearly as bad. We've already done it. I mean people. I did not like what Phil Murphy did. I don't like what he's doing. But it's a far cry from setting it up as a wealth tax on anyone who's a millionaire.

[Andrew Ross Sorkin]

The distinction is that there was no tax. That's right, 10%.

[Joe Kernan]

So then it's even more. He can make a case that's even more reasonable that no one will move.

[Andrew Ross Sorkin]

Senator, thank you for joining us. We got to run

[Joe Kernan]

that squawk pod for today. Thank you for listening. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Rossorkin. You can Tune in weekday mornings on Saturday NBC from 6am Eastern all the way until 9 and you can get the best bits of that three hour TV show right here on Squawkpod. Make sure you follow us. Leave us a review Share with your friends. We really appreciate the support. We'll meet you right back here tomorrow. Stay warm, stay dry.

[Andrew Ross Sorkin]

We are clear. Thanks guys.

[Steve Liesman]

Foreign.

[Schwab Announcer]

Schwab is powered by Ameritrade, giving you even more specialized support than ever before, like access to the trade desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy. Gut check. Need assistance? No problem. Get 24. 7 professional answers and live help. And access support by phone, email and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more at schwab. Com Trading.