The Problem with Targeted Tariff Reprieves

Tuesday, June 12th, 2012 and is filed under Blog, Taxes

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Last week, we posted on the arcane issue of Miscellaneous Tariff Bills (MTBs).  These are targeted pieces of legislation that temporarily suspend tariffs on imports of raw materials used by domestic manufactures and importers.  When Republican adopted the earmark ban, they included MTBs that are designed to benefit fewer than 10 companies in the moratorium.

A number of good conservatives want to reinstate these targeted benefits because they would ultimately lower tariffs.  We argued that while MTBs are technically pro-growth tariff reductions, they are no better than targeted tax cuts.  They encourage the crony capitalism that is associated with parochial interests and can be used to grease the skids of bad legislation.  They often only benefit one importer who contributes prolifically to the incumbent member back home that sponsored the bill.  Hence, they embody all of the same problems as earmarking.

Yesterday, the Washington Examiner reported that many of the beneficiaries of the outstanding MTB requests have donated to the sponsor of that bill.  They found that the two senators with the most MTB requests this year are Robert Menendez (D-NJ) and Bob Casey (D-PA).  As you can imagine, there is a major money trail to follow:

Pharmaceutical giants Bayer and Johnson & Johnson would each benefit significantly from multiple bills Menendez sponsored, according to disclosure statements he is required to file. So would a half-dozen chemical manufacturers.

All of the companies have major facilities in New Jersey. Bayer HealthCare, for instance, last year selected the state for its new east coast headquarters.

Several of the companies also are political powerhouses. Bayer has spent $22.9 million in federal lobbying since 2009, according to disclosure reports, which do not specify how much of that was spent on MTBs.

The company also donated $819,966 to congressional candidates through its political action committee in that time, including $8,000 to Menendez.

Johnson & Johnson’s PAC has donated $1.9 million to federal candidates since 2009, according to the Federal Election Commission. Menendez got $10,000 of it.

It is a simply incomprehensible to me how some conservatives are overlooking the special interest/crony capitalist side of this debate.  We all want lower taxes and tariffs, but until they are lowered across-the-board, everyone must be equal under the law.  It’s similar to the waivers granted under Obamacare for narrow special interests.  They induce the worst kind of political favoritism and help perpetuate the “survival of the fittest lobbyist” culture in DC.

The solution to high tariffs is to open up a universal process to all importers in the country.  Senators Jim DeMint and Claire McCaskill have introduced legislation that will allow companies to directly petition the International Trade Commission for a tariff reprieve instead of hiring a lobbyist to carve out a bill in Congress in order to petition the commission.  This will level the playing field for all importers and ensure that those with legitimate claims are not drowned out by those companies who have better lobbyists.

Most importantly, it will prevent us from vitiating a part of the earmark ban, thereby paving the road for a complete reinstatement of this odious practice.  The earmark ban has already had a tremendous effect in stopping bad legislation from passing by bribing members with personal favors.

The concept of MTBs might be new to 99% of us, but we must fight against them just as strongly as we fought against earmarks.  They are one of the same.