America’s habit of charging tariffs on imported textiles is particularly egregious. Clothing represents a larger share of consumption for poor people than for the rich. Consequently, I think most people understand that if I were to propose a special sales tax on clothing it would be an unusually regressive tax measure. By levying the special tales tax exclusively on foreign-made clothing we don’t eliminate the negative impact on poor Americans. We do, however, shift around who benefits. By taxing only foreign-made clothing, government revenue (which at least finances many programs that are important to poor people) declines and instead many of the benefits are captured by the owners and managers of US-based textile firms. To make things even worse, politically powerful well-heeled people have generally managed to make it the case that luxury goods are taxed more lightly than things ordinary folks buy.
Long story short, dropping tariffs on imported textiles is one of the easiest and most effective things we could do to help poor Americans while also improving the prospects for economic growth in the third world.
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