Outdated Tariff Systems Means the Poor Pay MoreDispute With China Obscures Big Role Tariffs Play in Consumer Prices
By Martha C. White 6/2/10 6:00 AM
The Commerce Department tweaked China recently when it slapped a 99 percent tariff on Chinese-made oil field pipes entering the U.S. The move was but the latest volley in a long-running skirmish over a wide variety of imports. To the extent that most people think of tariffs at all, it’s usually in a context like this. Tariffs are perceived as little more than an obscure negotiating tactic for trade disputes. But thanks to the large number of imported goods Americans consume on a regular basis, tariffs actually play much more of a role in average Americans’ lives — and household budgets — than they may realize.
Most people take for granted that they know how much an item will cost them when they look at the price tag and figure in the amount of their local sales tax. But low-income Americans end up paying extra for necessities like clothes and shoes — victims of an outdated, inefficient tariff system that inadvertently penalizes the poor. Even proponents of reform, though, acknowledge that the byzantine nature of the tariff code and the low priority it’s generally assigned by lawmakers makes the prospect of changing this entrenched system unlikely.
Luxury goods have very low tariffs, while cheap clothes, underwear, shoes and household products have much higher rates, said Edward Gresser, senior fellow and director of trade policy at the Progressive Policy Institute. “The people who are paying for the tariff system don’t know they’re paying for it,” he said.
“It’s the dirty secret of the U.S. tariff code,” said Daniel Griswold, trade policy expert at the Cato Institute. “It’s our most regressive tax that the federal government imposes.”
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The disparities are staggering. In his research, Gresser found that the tariff rate on a cashmere sweater is 4 percent; the rate for one made of much cheaper acrylic is 32 percent. A silk brassiere has a tariff rate of less than 3 percent, but the rate on a polyester one is slightly less than 17 percent. The tariff rate on a snakeskin handbag is just over 5 percent but climbs to 16 percent for one made of canvas. Similar variations occur when it comes to household goods. Drinking glasses that cost more than $5 each have a tariff of 3 percent, while those that cost less than 30 cents each have a rate of 28.5 percent. A silk pillowcase has a rate of 4.5 percent; this goes up to nearly 15 percent for one made of polyester.
Overall, clothes and shoes contributed nearly $10 billion in tariff revenue in 2009, while higher-cost items including audiovisual equipment, computers and even cars added less than $2 billion. Gresser contends that the $10 billion is disproportionately borne by people who can’t afford to buy luxury goods. What’s more, when customers pay sales tax on these products, that amount is also higher than it would otherwise be thanks to the tariff that drives up the retail price.
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http://washingtonindependent.com/85893/outdated-tariff-systems-means-the-poor-pay-more