Tariffs Are Harmful and Regressive, Regardless of Origin
Story Stream
recent articles

Why is the United States the richest, most opportunity-laden country on earth? There are so many answers to the previous question, but one that arguably doesn’t get enough air time has to do with the free flow of goods and people within all fifty states.

Indeed, it’s too easily forgotten that as opposed to a measure meant to regulate trade within the U.S., the Constitution’s Commerce Clause was all about keeping trade “regular.” Translated, no barriers to the flow of people or goods.

It’s something to think about as states like Colorado add delivery taxes to services provided by businesses like DoorDash, GrubHub, and myriad other local businesses. More troubling, Colorado is just the beginning. While its tax is .27 cents per delivery, Minnesota legislators are trying to add a .75 cent delivery tax in the Land of Lakes. Call these levies a tariff, plain and simple, all the while recognizing that taxes on delivery bring with them challenging externalities beyond restraining trade.   

For one, the taxes are regressive. The simple reality for a lot of poor people is that access to prepared meals, groceries and products/services more broadly is very limited where they live. Implementation of these taxes is a cost that will most burden those least able to swallow the cost.

For two, it’s essential to keep in mind that we’re talking about a delivery service. At a time of nosebleed gasoline prices, the cost of fuel may already be built into prices, only for the states to arrogate to themselves an extra revenue stream. Regressive yet again.

For three, they’re not cheap despite what some readers may well believe. As one restaurant owner in Minnesota has pointed out, .75 cents on a $25 order is a 3 percent tax. These costs add up, after which it should be said that the taxes levied on delivery services hopefully remind readers that not everyone has a car in the first place. Delivery services offer a way for individuals who lack mobility either for health or financial reasons to attain goods and services that are quite literally out of reach.

Looking beyond the rather regressive qualities of the delivery taxes, let’s then consider the position they put businesses in. It turns them into tax collectors for states looking for all manner of ways to collect more. Taxes on delivery raise many more questions about how to collect the money, and in particular how to collect when it’s remembered that “free delivery” is a way that some businesses compete.

These problems and questions don’t seem to concern legislators in Colorado and Minnesota. They want their money. Underlying the grab is a brazen desire to recoup reduced tax revenues born of people driving less in concert with delivery services shouldering more of the proverbial shopping burden. Put another way, delivery services have competed drivers off the road enough that state highway funds are hurting. Eager to maintain the revenue status quo that formerly prevailed, they’ll impose a regressive tax to mitigate the alleged burden of reduced driving on highway funds.

It all brings us back to what these delivery taxes are. They’re tariffs meant to shield governments from the lower-cost fruits of progress. No thanks. Per the aforementioned Commerce Clause, trade is supposed to be regular, not just regular insofar as it doesn’t deprive state highway funds or unnecessary bureaucracies of the money they think is theirs.

John Tamny is editor of RealClearMarkets, Vice President at FreedomWorks, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His latest book is The Money Confusion: How Illiteracy About Currencies and Inflation Sets the Stage For the Crypto Revolution.

Show comments Hide Comments