Outdated Tariff Systems Means the Poor Pay More « The Washington Independent

Outdated Tariff Systems Means the Poor Pay More « The Washington Independent:

low-income Americans end up paying extra for necessities like clothes and shoes — victims of an outdated, inefficient tariff system that inadvertently penalizes the poor.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, trade policy director at the Democratic Leadership Council. “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.” ...

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.

Globalization has had a similar incidence in labor markets. It has adversely impacted the lowest-wage manufacturing workers and benefited the highest wage people in finance who have been able to sell financial products all over the globe. Whereas highly paid doctors have little competition from globalization, low wage jobs get much more competition from foreign workers (such as via immigration).