US Tariff Structure is Highly Regressive

(cc photo by epSos.de)

(cc photo by epSos.de)

Martha C White has a great piece on the poorly-understood issue of the highly regressive structure of America’s tariffs on imports:

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 But low-income Americans end up paying extra for necessities like clothes and shoes — victims of an outdated, inefficient tariff system that inadvertently penalizes the poor.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.

As an example, “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.” And this is generally the case across the board. The kinds of goods where freer trade would mostly benefit the poor are exactly the kinds of goods where trade is least-free. And of course you see something similar in labor market terms. It’s quite difficult to import foreign doctors and subject the richest doctors in the world to some price competition, but it’s easy to throw American factory workers into competition with foreign ones.