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Trade, Taxes, and Tea Parties

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"Trade, Taxes, and Tea Parties"

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(cc photo by fibonacci blue)

(cc photo by fibonacci blue)

In case you were wondering whether or not the Tea Party movement constitutes an ideologically coherent, policy-oriented, principled defense of small government and free markets:

While 65 percent of union members say free trade has hurt the U.S., so do 61 percent of Tea Party sympathizers. Democratic pollster Peter Hart and his Republican counterpart Bill McInturff, who conduct the NBC/WSJ poll, say the greatest shift against free trade has come among relatively affluent Americans, or those earning more than $75,000 a year.

I do think there’s a real question, underdiscussed in policy circles, of whether the GATT model of “trade deals” has run its course. The textbook argument for free trade counsels in favor of unilateral free trade, not “deals.” The deal-based approach is motivated by a political calculation that mutualism would be easier to sell. At this point, however, free trade agreements are toxically unpopular and their text tends to include many many many provisions that have only a tangential relationship to the cross-border exchange of goods and services.

A more direct approach might simply be to stop talking about deals, stop talking about “free trade,” and just focus on regressive sales taxes:

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.

More generally, we’re pulling in about $10 billion a year in federal sales taxes on imported clothing, primarily drawn from non-luxury items. That’s a sharply regressive tax and I’m certain that if a politician stood up and said “what this country needs is a sales tax on non-fancy clothing” everyone would consider that insane. But nobody wants to hear about free trade.

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