Cutting job-killing tariffs
Among its other sins, Congress is now forcing U.S. companies — and American consumers — to pay an extra quarter-billion dollars a year in tariffs owing to its own inaction. Why does our own government impose tariff burdens on us that raise the cost of living for all Americans? This selfinflicted wound should be ground zero for bipartisan action. Now.
Tariffs are taxes, and tariffs on manufacturing inputs are particularly stupid taxes. Taxing the raw materials domestic manufacturers need — those not even available in the United States — is an especially wrongheaded subset of an overall dumb idea. Because this was clear to everyone, Congress has long sought to reduce these burdens to growth by targeting these tariffs for (sadly, temporary) elimination.
That temporary protection for consumers has now run out — again.
Although the many sundry creatures known as “tax extenders” have been a mixed lot in terms of their benefits for the economy at large, keeping tariffs off these manufacturing inputs is one that deserves to be renewed. It doesn’t make any sense at all for our own government to be taxing our own employers for importing materials that aren’t available here.
Manufacturers producing goods in the United States (like elsewhere) often face the difficulty that many of the raw materials they need to make their product are not available domestically. Recognizing that it would be counterproductive to impose higher costs on American manufacturers simply because they were using goods not available domestically, Congress has — through the Miscellaneous Tariff Bill — been waiving or reducing tariffs (that is, taxes) on such materials. By reducing costs, these tariff adjustments have helped U.S. products become more competitive abroad, while costing consumers less at home.
For procedural reasons, however, regular congressional action is required in order to prevent these taxes on manufacturing inputs from reverting to their prior levels. Last year, Congress didn’t extend the protection, and it expired. The unfortunate result has been that U.S. companies are being taxed an extra quarter-billion dollars a year. The United States is applying a tax that only makes it harder for American companies to compete with their foreign competitors — and harder for them to create or even maintain existing jobs and economic growth. When combined with our punitive corporate-tax rate and unique desire to try to tax worldwide sources of income of American companies (something no other First World nation does), American manufacturers are really at a disadvantage.
Unlike the heavier lifts of fixing our worldwide tax system and lowering our corporate rate, though, fixing the tariff problem has been regularly accomplished for years. Last time around, it was estimated that the exemptions granted under the Miscellaneous Tariff Bill helped support 90,000 jobs and expand real gross domestic product output in the United States by about $3.5 billion a year. In contrast to fundamental tax reform, Congress should be able to restore the bill in short order.
In fact, for 30 years, the Miscellaneous Tariff Bill passed Congress without a hitch, and it is still broadly popular. Some in Congress have mischaracterized the tariff-tax cuts as “earmarks.” However, these cuts are the opposite of earmarks. They are not spending bills; they are tax cuts, period. No federal money is spent on their enactment. While earmarks favor only a special few, the tariff-tax cuts benefit wide swaths of American industry and help create U.S. jobs and economic growth. The cuts are widely publicized and vetted by the U.S. International Trade Commission, the Department of Commerce, U.S. Customs, the Office of Management and Budget, and others.
The tariff-tax is especially self-defeating because when one takes into account the negative impact on revenue when U.S. companies find it more expensive to produce their products, it will generate little if any net income for the government.
Consider the challenge facing Exxel Outdoors, a manufacturer of outdoor products, such as sleeping bags, tents, and hunting and fishing apparel. They are the only U.S. manufacturer of mass-market sleeping bags, producing more than 2 million a year at their plant in Haleyville, Ala. Their sleeping-bag production requires the use of materials and inputs that simply aren’t available here in the United States. They have no choice but to import them. By failing to extend the Miscellaneous Tariff Bill, Congress is putting in jeopardy the company’s ability to compete against foreign manufacturers — and maintain jobs for roughly 100 employees. Even worse, the company’s plans to expand and create more jobs are in limbo.
Our economic competitors overseas seem to understand the importance of import tariff-tax relief, even if we don’t. The EU has put in place an administrative process to exempt duties on goods that make European products more competitive. Canada has suspended duties on manufacturing inputs.
Many of the sorely needed fixes to America’s tax disadvantages will take time and coalition-building, but this one is easy. The Miscellaneous Tax Bill is a pro-growth tax cut, with broad support, that helps American businesses to compete. Let’s pass it. Grover Norquist is president of Americans for Tax Reform.