Currently (April 2018)
there is considerable debate raging as to the wisdom of the Trump
proposed tariffs. As one more opinion on the subject, I would like
to frame the argument in terms of who pays for maintaining the U. S.
marketplace rather than in terms of punitive actions and retaliatory
reactions in the form of tariffs.
Since the government's
income in the U. S. is primarily derived from taxes, and in
particular from income taxes, the government's costs of providing the
infrastructure - currency, roads, courts, etc. - is paid in this
country by the individuals and companies (which again boils down to
the individuals) that pay the income taxes. Thus the participation
in the U. S. markets by foreigners is a free ride since they do not
pay U. S. income taxes. This is why U. S. made goods do not compete
in both domestic and foreign markets.
The use of tariffs to
level the playing field does provide a mechanism to make foreign
sellers contribute to the costs of maintaining the marketplace they
are enjoying, but it requires much legislation and regulation to
target which goods and who's selling them. This in turn engenders
hostility in those targeted and invites the 'trade wars' that are the
current concern of the chattering classes. A flat tariff might be
preferred in that it would be less 'in your face' to the trading
partners otherwise targeted, but it still reeks of hostility to 'free
trade'. It also does nothing to make U. S. goods more competitive in
foreign markets.
To this author, a better
solution is to replace the income tax with a National Sales Tax on
all new goods. With respect to incoming foreign goods this serves
the same purpose as a tariff - it makes the foreign producer pay his
fair share of the support of the U. S. market. It relieves the
exported goods from the income tax burden that makes U. S. goods
non-competitive internationally. It allows U. S. workers to compete
with foreigners as well as non-taxpaying illegals. It invites less
hostility since it applies to domestic as well as all foreign goods
equally. It requires no additional infrastructure to assess and
collect tariffs. And as a huge added incentive, getting rid of the
income tax would do more to restore health to the U. S. economy than
any other single action.
Replace the income tax AND
potential tariffs with a National Sales Tax. A win-win-win solution.
