Cut­ting job-killing tar­iffs

The Washington Times Weekly - - Commentary - By Grover Norquist

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.

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