Report urges U.S. tariff cuts to help poor consumers

WASHINGTON Tue Jun 14, 2011 11:21am EDT

WASHINGTON (Reuters) - The United States should eliminate most, if not all, of its remaining taxes on imported goods to give low-income consumers extra spending cash, a new report recommended on Tuesday.

"The ideal approach would be bold: simply abolish consumer-good tariffs on clothes, shoes, luggage, linens and other home goods," said Ed Gresser, director of the trade policy shop ProgressiveEconomy in the report.

The United States collected about $26 billion in tariffs on about $1.9 trillion of imports in 2010, suggesting an average tariff rate of only 1.3 percent.

But in fact, tariffs on individual items vary dramatically, with goods most likely bought by the poor frequently hit with the highest rates, the report said.

Sneakers with a wholesale price of less than $3 have a 48 percent duty, while leather dress shoes only 8.5 percent. The duty on a polyester bra is 16.9 percent but just 2.7 percent on a silk one. A canvas bag faces a 16 percent tariff, but one made from snakeskin 5.3 percent.

Gresser, who worked previously for Senator Max Baucus and the U.S. Trade Representative's office, estimated about two-thirds of U.S. import duties are collected on home goods such as clothes, shoes, towels, pillowcases, luggage, handbags, silverware, plates and drinking glasses. Many of those items are no longer made in the United States.

"Tax analysts know very well that any tax on home goods will be regressive. This is because wealthy families spend the smallest share of their income on home goods, while low-income families -- especially if they have children -- spend the most," Gresser said.

Import taxes are often defended as necessary to protect to American jobs, but falling U.S. employment in high-tariff industries such as clothes, shoes, luggage and linens suggest they have been ineffective at that.

Some 1.34 million Americans worked for clothing manufacturers in 1970, but 40 years later only about 160,000 still do. The U.S. shoe industry has shrunk from 230,000 workers to 1,000 over the past four decades.

The best way to eliminate remaining U.S. duties would be through a comprehensive world trade agreement in which other countries agree to cut theirs, Gresser said.

Since those talks are stalled, lawmakers should consider other options such as the Affordable Footwer Act and the U.S. Outdoor Act, which both have bipartisan support, he said.

The first would scrap tariffs on shoes no longer made in the United States and the second do the same for outdoor apparel like fishing and hiking clothes.

Congress, perhaps as part of a larger tax reform, should also consider eliminating tariffs on all home goods not made in the United States, the report said.

(Reporting by Doug Palmer; editing by Doina Chiacu)

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