This post is a little off topic from my normal posts about
chemical security, chemical safety or cybersecurity, but I think that death and
taxes are always fair game for discussion. But let me segue into this by
explaining a part of my daily information search routine.
Checking Legislation
Knowing that every day that one or more houses of Congress
are in session legislation is introduced I try to check the Daily Digest
of the Congressional Record for the bill numbers introduced the previous day.
Then I check the Library of Congress’ Thomas
(named after Thomas Jefferson) web site to review the titles of each of those
bills. Bills that look like they may contain subject matter of interest to me
get downloaded from the GPO web site when they become available for detailed
reading.
Typically this doesn’t take up too much time as there are
not that many bills introduced on most days. One of the exceptions to that rule
is the start of each new Congress when the docket is cleared and the
legislative process begins anew; then it’s not unusual to see a hundred or more
bills introduced for each of the first few days of the session. Another period
of heavy bill introduction is the last week of April, apparently there is a
deadline for the submission of bills that have to do with duties and tariffs;
taxes paid on goods that come into the United States.
Last week we saw a total 776 bills introduced in the House
and Senate to ‘extend or modify’ existing suspensions or reductions in duties
on goods imported into the United States. Now bills are assigned numbers based
upon the order in which they are given to the clerk so any other legislation
introduced last week was intermingled in the stack of ‘duty’ bills. I may have
missed some interesting bills for this stack of tax related stuff.
The bills cover a wide range of materials from basic
chemicals to completed kitchen appliances. Almost every industry is represented
on both the manufacturing and user sides. The biggest single category of
materials is chemicals, ranging from basic chemical raw materials to pharmaceuticals,
both intermediates and finished products.
Purpose of Duties and Tariffs
Duties and tariffs are typically used to protect domestic
producers of products from competition from abroad. Since the United States is
a ‘free trade’ country, we like to think that our use of these tax tools is
designed to protect domestic manufacturers from ‘unfair competition’.
Countries that allow their manufacturers to use cost-cutting
practices that would be illegal here, for example, would have a duty placed on
their goods coming into the United States. There is a complex legal process
that is used to determine which goods and countries fall into this category.
There are a number of legitimate political reasons that
duties are placed upon in coming goods. This is one of the types of low level
sanctions that can be placed upon countries that we are having serious
disagreements with about various types of policies. It makes it more costly for
them to sell their goods in this country, hitting them in the pocketbooks of
producers of goods who then, in theory, will encourage their government to be
more responsive to our way of thinking.
There have also been periods in our not too distant past
where congresscritters routinely used the power to levy duties to please
manufacturers in their district or State. Those manufacturers would then in
turn support the re-election efforts or post-retirement employment efforts of
those congresscritters.
Tariffs and Duties Can Hurt
As more and more basic manufacturing moves out of the United
States it becomes necessary for domestic manufacturers to buy raw materials
from overseas sources; either because there are no longer domestic suppliers or
there are not enough domestic suppliers to provide the necessary volume. When
there is a tariff or duty on these raw materials then the domestic manufacturer
in effect pays the tax on the incoming goods and in turn passes those costs on
to their customers.
Additionally, if that manufacturer has competitors in
friendly countries, they may be able to buy the raw material without paying a
duty and be able to sell the manufactured product at a lower price because of
that.
Finally, when finished goods come into the United States
with a tariff or duty applied, the end user, the consumer, pays that tax in the
higher price they pay for the merchandise.
Politics
Now manufacturers who are forced by the market to buy foreign
produced goods that have tariffs or duties laid upon them have a legitimate
gripe; they are being forced to pay for a political or economic penalty that
they have nothing to do with. They have every right and even a responsibility
to petition their representatives to reduce or modify a duty or tariff to
reduce the burden that the manufacture is being forced to pay.
On the other hand if a company moves their manufacturing
facility overseas to take advantage of local conditions that allow for lower
manufacturing costs they should be unsurprised when a competitor that keeps
manufacturing in this country cries foul when some of those cost savings strategies
are less than legal in this country. When a tariff or duty is subsequently laid
upon those goods the manufacturer with overseas products has less of an
expectation that their congresscritter has a responsibility or obligation to reduce
or suspend such a tax.
Now the 776 bills submitted last week almost certainly
contain proposals that are based on both of the situations described above. One
would like to think that our legislators have adequately investigated the
individual situations to ensure that they are due to the former rather than the
later. One would like to think so, but I would very rather suspect that no such
investigation took place in most instances and, for the most part, the ones
that were done were questionable in their professionalism and diligence;
congressional staffs aren’t that big, nor are they paid that much.
Now I have no way of knowing which of these are legitimate
exercises of political power, but there is at least one that I would suspect
based upon the politics and economics of the area where I lived most of my
adult life. But, I have no staff and few resources to conduct an appropriate
investigation, nor really the inclination to do so. As a result I won’t point a
specific finger at a particular target.
There must be some percentage of these bills that are
morally or politically suspect, hopefully it is rather small. With so many
bills being considered in a relatively short period of time by one committee in
the House and another in the Senate, I doubt that any but the most egregious
bills will be removed from consideration. Since they will be rolled into a
single bill for floor consideration (neither body could afford the time needed
to consider 776 bills in even the most abbreviated legislative process) there
is little likelihood that there will be any significant opposition to these
bills being passed.
I don’t know of a better way to do this, but the light of
public scrutiny should be shown on the process.