Sunday, February 26th 2006
The Tariff Tax
According to a recent Cato paper, every time you buy a stick of butter you pay a 100% tax on the sale. You also pay an 80% tax on the sugar components of all food. Similar taxes, ranging from around 10 - 100 percent are placed on a slew of food products in the United States.
The government makes this tax by paying farmers to grow agricultural products below the rate of demand, and then putting tariffs on competing imports to make the domestic price conform to the reduced supply.
When you go to the store to buy the product, you are forced to pay the difference between the market price and the government price , as well as pay for the original subsidy in your income taxes. The result: money is transferred from you, to a government bureaucracy, and finally to a person with a government guaranteed “private sector” job (there is in fact, one Department of Agriculture bureaucrat for every three farmers in America).
The study states the average American family spends 146 dollars a year for the tax. This may seam as a small sum to a comfortable family, but to people living hand to mouth on the grocery budget, this makes a significant difference.
In addition to the direct cost to consumers, subsidies tie up billions of dollars in capital and millions of workers in sub optimal production. The workers and investment money used to produce goods at a loss could be employed in profitable industries or even in the slew of crops that America exports to the world (only the unmarketable ones are funded).
When Australia and New Zealand abolished their agricultural subsidies and tariffs, they saw a marked reduction in the agricultural sector (with no uptick in unemployment because labor shifts), but that the farms remaining produced goods far more efficiently, and survived on their own selling goods the market would pay for.
The only argument that usually sticks around once it’s clear the subsidies are a giant barrel of pork is a patriotic plea to save that endangered species, the American family farmer.
The only answer to that is that subsidies have been in place for 70 years, putting the farmers in the generational line of farming for a government check. The days of American pioneers building homesteads on the sweat of their backs is mostly a memory; most of the farms being subsidized are corporate farms manned by immigrant seasonal workers. Those that are still family farms have been farming for decades at a loss, maintaining a way of life for the purpose of national quaintness (when they farmed for a profit back in the day, it was actually a way of economic life).
Who is to say that these particular workers, in this particular sector, should be paid to produce at a loss when anyone else would loose their shirt without government pity?
sorry, but this is bs. The number of farm operators (ie farmers) in the us in 2002, according to the USDA(), is approx. 3 million. That would mean the USDA employess 9 million people. Umm…
Don’t believe everything you read. I’m completeley against ag. subsidies as well, but incorrect arguments don’t help the cause.
Comment by nuance — 2/26/2006 @ 8:58 pm
also, saying that the average family spends $146 dollars on the subsidies doesn’t mean the poorest families do. This is why we have a progressive tax system rather than a flat tax.
Comment by nuance — 2/26/2006 @ 8:59 pm
nuance, fyi, the progressivity of the tax system of course relates to income. The rich dont pay more for the prices of given goods. These ridiculous subsidies are thus regressive, the poor pay more as a proportion of their income.
And look at steel and efforts to put tariffs on Chinese goods; all of these are equally contemptible and have the same effects. But special interests abound in government, any politician can be bought. On a local level, the student gov, the ASUC, is surely also captured by such special interests. They get the best part of $2 million a year, but where’s the beef? The ASUS is a farce. Its even more scandalous that UC Berkeley coerces us into financing the charade; else we’re not permitted to register.
Thing is, the costs are small and diffuse, but gains to the lobbyists substantial. Thats why all concentrations of power are so dangerous.
Comment by gary — 2/26/2006 @ 9:38 pm
sorry, the figure was three farmers for every DOA employee.
Comment by mickeyk — 2/26/2006 @ 9:44 pm
posting edit…
Comment by mickeyk — 2/26/2006 @ 9:45 pm
ummm.. last time i checked the asuc pays the lions share of most clubs on campus’ budgets. Not the patriot, but that’s because the patriot chooses not to accept asuc funding.
also, the tax supporting farmers is phased progressively - it comes out of the general income tax, meaning that rich people pay a larger share of it than poor people. If the figure was referring to costs directly hitting consumers (ie more expensive veggies), then, yes, it would be regressive.
Comment by nuance — 2/27/2006 @ 7:22 pm
The Ag substidies that are paid by the government are much needed. The unfortunate thing is that the majority of them go to large corporate farms, not the small family farms.
The most used peaces of equipment by farmers are tractors, combines, combine heads, and fertilizers. Each of these cost well over $100,000 a peace. One bad year would put most farms out of business if it weren’t for these subsdies. I know this because when hog prices fell in 2000-2002 many farms in South Central Illinois were I lived at the time would have shut down had it not been for these programs.
You might be quick to say that that is part of doing business in a free economy, but keep in mind that American farms, especially Mid-Western farms, produce the majority of the world’s food supply. And a great deal of these farms are family owned, although that number is dropping as corporate farms push the smaller ones out.
apatriotlegion.blogspot.com
Comment by americanpatriotlegion — 2/28/2006 @ 4:16 am
Other countries can produce the food cheaper and in greater quantity than us; there would be more food at a lower price if we released the subsidies.
Businesses are supposed to shut down when they stop making money. This is how capital moves from low to high profits and makes the free market the most powerful economic system in the world.
Agricultural products are just that, products. Brought to market, a head of lettuce is priced the same way as a microprocessor, by the price that a consumer is willing to pay for it. Countries that have realized it doesnt matter what kind of widgit they make as long as they keep expanding have been the most succesful.
Comment by Mickey Klein — 2/28/2006 @ 9:05 am
The tax is also regressive.
Poor families spend a greater proportion of their money on food. Think about it, who spends more of the paycheck on groceries: a single mother paid on the hour or a lawyer in a corner office?
Comment by mickeyk — 2/28/2006 @ 9:12 am
Also, its important to note that farmers are, on average, not poor or destitute. Ultimately, this represents a transfer from the poor to the rich so these subsidies ought to be opposed by all political persuasions. Furthermore, I recall Milton Friedman point out another element of farce here. Not only does the Gov subsidize tobacco farmers, but it also subsidizes anti-spoking campaigns! I mean, how inane is that? But, I really dont know a practicable solution; the costs are so diffuse with no comparable lobby group against. As I said, you can compare this to the ASUC; only 33% of our money, I believe (see http://abolishtheasuc.blogspot.com) goes to student groups. For the most part the rest is dished out to lobbyists (and we know who *they* are). Whats more, every student on campus pays an Ethnic Studies Fee. Yes, you too! Most students dont even know about this and dont receive any benefit. Meanwhile the Ethnic Studies Dept is making a small fortune (above and beyond normal funding). And, again, we know the kind of hateful, anti-capitalist rhetoric thats disseminated from depts like that.
Comment by gary — 2/28/2006 @ 11:30 am