Taxpayer's Tab: NTUF looks at tariff & duty suspension bills

Welcome to The Taxpayer's Tab -- the weekly newsletter for up-to-the-minute research from the National Taxpayers Union Foundation's BillTally project.

Legislative Spotlight: Tariff & Duties Suspension Bills

In the market for some strontium halophosphate doped with europium? Or, how about yttrium oxide phosphor, activated by europium? If so, Congress is working on a tax break for you.

The above chemical compounds are used in manufacturing fluorescent lighting, TV and computer monitors, and other electronic equipment. They were also included among the thousands of bills introduced this year to reduce the import tax on certain items by suspending tariffs and duties or extending a previously-granted suspension. Since these types of bills affect revenue, they are not included in our BillTally study of Congressional spending, but the sheer number of them that were introduced this year, and the growing controversy over their implementation, makes them noteworthy.

Roughly one-third of all Representatives and Senators either authored or cosponsored individual suspension bills that they would like to have included in the omnibus tariff bill that Congress will take up soon. We have counted 2,073 such bills introduced between February 7 and May 17 in the House and Senate. There is some overlap of companion bills between the two Chambers. According to Roll Call, around 1,300 suspensions are under consideration for inclusion in the final package.

These types of bills proliferate because under Congressional rules, individual suspensions can reduce revenues to the Treasury by no more that $500,000. Members often draft several different but related bills to keep each one under the limit. The following examples were introduced by Representative Brett Guthrie (R-KY) and Senator John Kerry (D-MA):

• H.R. 4711/S. 2797: A bill to extend the temporary suspension of duty on leather basketballs;

• H.R. 4713/S. 2799: To suspend temporarily the duty on rubber basketballs; and

• H.R. 4714/S. 2798: A bill to extend the temporary reduction of duty on basketballs having an external surface other than leather or rubber.

Individually, the budgetary impacts are small, but when thousands of suspensions are rolled into a single bill, the effects add up. CBO estimated that the most recent tariff bill, which passed two years ago, reduced revenues by nearly $300 million over three years.

Before the introduction of the income tax, tariffs were a major source of revenues for the federal government. Today, not so much: Customs and duties fees are estimated to raise $30.8 billion in 2012 (see Table 2.5 Fiscal Year 2013 Historical Tables: Budget of the U.S. Government), or, 1.3 percent of total receipts (nearly $2.5 trillion). The average tariff rate for all products in 2010 was 1.78 percent.

Previously, tariff bills were enacted with little dispute, but as mentioned above, a controversy has been brewing over their use. Opponents argue that the vast majority of the tariff breaks benefit only a handful of companies and therefore qualify as earmarks, which are currently banned. Proponents counter that the reduced rates are open to anyone who would want to import the items and that they help spur job creation. They further argue that such suspensions are different from actual budgetary set-asides found in appropriation and authorization bills.

In general, these bills are supported across the aisle, but there is an interesting partisan split between the Chambers this year. Republicans sponsored more of these bills than Democrats in the House, but the opposite was true in the Senate. In the House, 75 Republicans either sponsored or cosponsored duty and tariff reduction bills, verses 58 Democrats. Only two Senate Republicans signed onto any of these bills in the Upper Chamber, along with 29 Democrats and one Independent.

Below is a table of those Members cosponsoring the most suspension bills in each Chamber.

As Tables 3 and 4 show, Eastern and Midwest states stand to be the prime beneficiaries of these reductions.

While BillTally focuses on spending, the popularity of these suspension bills serves as a reminder of the considerable legislative activity that can occur on the revenue side of the budgetary ledger as well.

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