Booting the Shoe Tax
The source may be suspect, but they have a point. The American Apparel & Footwear Association is campaigning for a bill called the Affordable Footwear Act. Sounds like another bit of self-serving legislation, doesn’t it? But read on, because there is some surprising substance in this one, supported by liberals and conservatives. Bipartisan trade legislation – now that would be refreshing!
The Affordable Footwear Act comes out of a joint study by the normally left-wing Progressive Policy Institute and the usually right-wing Heritage Foundation. The idea of these two even talking to each other, much less producing a joint recommendation for legislation is somewhat mind-boggling. The PPI put out a paper in 2002 entitled Toughest on the Poor: Tariffs, Taxes, and the Single Mom that persuasively made the argument that tariffs and customs duties are a regressive tax because, by their nature, the tax rate does not vary according to one’s circumstances. Further, the highest duties tend to apply to the goods that are most consumed by poor people. Think about it. The highest customs duties tend to apply to things like clothing and footwear, some food products. Stuff that claims a higher proportion of a poorer person’s income than for a rich guy. The worst case example is inexpensive sneakers, which face a customs duty ten times the average for manufactured goods entering the United States. The 2002 paper looked at a hypothetical group of three women: a vice president at a hotel, her secretary and a hotel maid. The result was that the v.p. worked 1.5 days every year to pay the tariffs on things she consumed, the secretary had to work three days – twice as long, and the maid had to drudge for an entire week.
Fast forward to 2007, by which time the Heritage Foundation has come on board. Heritage and PPI jointly note, referring to 2006:
“Americans bought about 2.4 billion pairs of shoes last year. … The value of these shoes at the border was $19 billion, and the U.S. government collected footwear duties amounting to almost $1.9 billion on the shoes. While the average weighted U.S. tariff rate across all traded goods is 1.6 percent, tariffs on shoes begin at 8.5 percent for leather dress shoes, rise to 20 percent for running shoes, and peak at more than 60 percent for some grades of cheap sneakers.”
How many poor people do you know that are buying leather dress shoes? How many are buying cheap sneakers? PPI and Heritage looked at what happens when the tariff is applied to the sneakers. By the time the sneakers had moved across the border and gotten through the retail supply chain, the footwear tariff had an impact on price that was roughly three times the federal cigarette tax, four times the national gasoline tax and twice the federal taxes on distilled spirits. You would think we want poor people to go barefoot!
Further, there are virtually no U.S. shoe producers or footwear workers that would be hurt by lowering or eliminating the tariff on cheap footwear. We have about 16,000 jobs in our footwear industry, almost entirely in design, marketing or highly specialized niches that wouldn’t suffer from lower customs duties.
I blogged yesterday about tariffs we don’t need and the footwear tariffs are among the most egregious. Tell your representatives and senators to vote for the Affordable Footwear Act. Leave footprints on ‘em if they don’t.
