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The U.S. has a Shoe Tax?

2 min readBy: Philip Dittmer

Well, not technically. But the U.S. does impose a tariffTariffs are taxes imposed by one country on goods or services imported from another country. Tariffs are trade barriers that raise prices and reduce available quantities of goods and services for U.S. businesses and consumers. on foreign-made shoes. Today, 99% of shoes purchased in the U.S. are manufactured abroad, so there is a good chance that your favorite pair of sneakers was charged this so-called “shoe taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ” upon entry to the country-and you paid the lion’s share of the duty.

The tariff was implemented as a protectionist measure in the 1930s, when tariffs and protectionism were all the rage. A mark of diseased intentions (and resembling the arbitrary preferences in today’s tax codes), the duties were written to vary drastically by shoe type. While open-toed and high-end leather shoes were largely or altogether exempted, canvas shoes were set to face a duty of 67.5%. Apparently the Congressmen loved their Oxfords and the Congresswomen loved their open-toed heels.

The tariff helped protect a strong domestic footwear industry until the late 1970s, when production began to move offshore. Now only 1% of U.S.-consumed footwear is manufactured domestically, making the tariff an obsolete relic of an obsolete economic theory. Without an industry to protect, the tariff essentially serves as a proxy tax on preference, with up to 40% of a pair’s price directly attributable to the tariff.

Footwear retailers and consumer advocates have been active in lobbying against this $2 billion annual import cost since 2007. Two weeks ago a bipartisan coalition in the Senate introduced “The Affordable Footwear Act,” which would eliminate the tariff on low-price and children’s shoes-roughly half of all duties. Senator Maria Cantwell (D-WA) calls the tariff a “hidden tax” borne by unsuspecting consumers, and the bill is being marketed as a proxy tax cut for low-income households and a correction to a regressive scheme.

Tariffs and taxes have two different purposes. Tariffs exist to inflate the price of foreign goods in order to give domestic industry a comparative advantage in the domestic market; taxes exist to raise revenue for the government’s operations. While it is officially considered a tariff, the shoe charge is equivalent to a tax on specific classes of foreign goods, and regardless of its classification it is bad policy. The government should not treat consumption of similar goods in a dissimilar manner. Those who prefer to purchase cheap foreign-made shoes should not be burdened by increased prices that are not imposed on those who prefer to purchase expensive foreign-made shoes. Playing favorites—whether in tax policy or archaic-and-obsolete-tariff policy—violates standards of transparency and neutrality. The Affordable Footwear Act is a fine effort, but one wonders why the bill does not propose to eliminate the shoe tariff in its entirety.