Wednesday, April 25, 2012

Bipartisan Push to End the (Regressive, Immoral) Shoe Tax

The Heritage Foundation's Bryan Riley and the GlobalWorks Foundation's Ed Gresser have a new briefer rightly supporting the long-overdue passage of the Affordable Footwear Act (H.R. 2697 and S. 108).  They argue:
Liberals and conservatives have plenty to disagree about. But faced with continuing high levels of unemployment and slow economic growth, they should agree on a few things—and one is that Congress should find ways to help Americans at the bottom rung of the economic ladder. The Affordable Footwear Act (AFA) is one such effort. Introduced by Joe Crowley (D–NY) and Lynn Jenkins (R–KS) in the House of Representatives and Roy Blunt (R–MO) and Maria Cantwell (D–WA) in the Senate, it would repeal many of the disproportionately high tariffs on shoe imports and save American families as much as $3 billion a year.

The AFA was first introduced in 2009, but three years later, Americans continue to pay more than they should for footwear. Now is the time for Congress to reduce tariffs on shoes and help all Americans save a few dollars on their next pair of work boots, pumps, or sneakers.
The whole thing is worth reading, but my, umm, "favorite" part is their explanation of the very real and significant cost of our existing tariff system, particularly for lower income American families:
Americans bought about 2.3 billion pairs of shoes in 2010—many designed here, but virtually all stitched and glued overseas.[3] The value of these shoes at the border was $22.6 billion, and the U.S. government collected footwear duties amounting to $2.3 billion—and a closer look finds that the government is charging poor families the most. Tariffs are 8.5 percent for leather dress shoes, rising to 20 percent for running shoes and peaking at more than 60 percent for some grades of cheap sneakers—the highest tariffs imposed on any manufactured good. For a pair of canvas sneakers with rubber soles that costs $10 to import, the government charges an additional $2.90 in import taxes....

Tariffs inflate the cost of the cheapest shoes by about one-third. As the sneakers travel through the supply chain on the way to the retailer’s shelf, the tariffs may be magnified by retail markups and state sales taxes. The $10 pair at the border is a $30 pair in the store, with the tariff now accounting for as much as $8.70, even though the original tariff provided the federal government just $2.90 in tariff revenue. In larger terms, these markups mean the tariff that raises $2.3 billion may cost shoppers billions of dollars more.

Footwear tariffs are a hidden, regressive tax on a household necessity. They reduce the amount of income families have to spend on other goods and services. This expense is most onerous for low-income families with children, who spend the largest share of their income on shoes and other necessities of life.
In short, this a tax rate that is highest on those who can least afford it.  It would be difficult, I think, to find a more unquestionably absurd and immoral US government policy (although I'm sure several come close).  Heck, even protectionists would be hard-pressed to justify the current tariff system on shoes or oppose the AFA, given the mind-blowing fact that, as Gresser and Riley note, there are virtually no footwear producers (or production jobs) in the United States anymore.
When I first reported on the Affordable Footwear Act back in 2010, I opined:
Free traders in Congress (all two of them!) have reintroduced the "Affordable Footwear Act" (H.R. 4316 ) which would mandate the unilateral elimination of abnormally high US tariffs on imports of low-cost shoes that aren't even made in America anymore. The bill highlights a great example of the idiocy and immorality of US tariffs and is a good first step to remedying such nonsense. Of course, the fact that legislation scrapping a pointless tax on a basic necessity that disproportionately harms poor Americans can't pass with overwhelming bipartisan support is a sad commentary on the state of US trade policy, wouldn't you say?
Considering that two more years have passed and Congress still hasn't repealed these tariffs, I'd say that "commentary" is markedly sadder at this point, wouldn't you?

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