Taxes on imports, known as tariffs, are regressive—they disproportionately burden the poor. A recent paper by Miguel Acosta and Lydia Cox explores the origins and implications of the regressive nature of the U.S. tariff code.

This paper is welcomed to the literature. As the authors note, the regressive pattern “has only been noted anecdotally” by Ed Gresser at the Progressive Policy Institute and others, including my colleague Ryan Bourne. Cox and Acosta lay out how U.S. “tariffs are systematically higher on lower lower-end versions of goods relative to their higher-end counterparts.” The authors note how the regressive pattern is particularly pervasive in final consumer goods categories. In fact, lower-end versions of these goods are subject to tariffs on average, four percentage points higher than their higher-end counterparts.

I also provide some examples of this regressive pattern in my chapter of my colleague, Scott Lincicome’s new book, Empowering the New American Worker.

Acosta and Cox explain that part of the story of how the U.S. tariff code became regressive is, unsurprisingly, a result of ignominious special interest lobbying. Interestingly, perhaps even ironically, another part of the story is an unintended consequence of liberalizing trade over decades. For example, in the Anglo-American Trade Agreement of 1938, the United States lowered tariffs on more expensive varieties of fishing reels because the United Kingdom primarily exported these high-quality reels. These types of concessions also continued with new trade agreements.

Liberalization also birthed an increasingly detailed schedule differentiating product quality. Later, as part of the General Agreement on Tariffs and Trade (GATT), the United States and the United Kingdom made more concessions for expensive varieties, and the regressive nature of the tariff schedule was born.

Acosta and Cox also examine the implications of the regressive tariff code and find that “consumers would save little over $4 billion on imported goods… if the regressive pattern were eliminated.” The authors go a step further and calculate that by uniformly lowering tariffs by 5 percentage points, “the average welfare gain for an individual earning $20,000 per year is about two times higher than an individual earning $100,000 per year.”

The origination of the regressive nature of the tariff schedule is important because of how bad government is at repealing poor policy. As policymakers consider ways to help the American worker, especially given the clear negative impact on welfare of these tariffs, they should seriously consider removing tariffs, at least on necessities, to help reduce prices and return some autonomy to people over their paychecks.

Last Sunday activists from Students for Liberty and Young Americans for Liberty, along with a few young Cato staff, demonstrated for Chinese human rights at the Commanders-Giants NFL game at Washington’s FedEx Field and the inaugural Fenway Bowl in Boston.

Demonstrations erupted about three weeks ago in response to a deadly fire in Urumqi and quickly expanded to cities across the country. The protests broadened to include complaints about China’s zero-Covid policies, denunciations of the Chinese Communist Party, chants of “Need human rights, need freedom,” and calls for dictator Xi Jinping to step down. Of course, the Chinese government doesn’t countenance dissent and moved quickly to crack down on the protests. It simultaneously eased the strict lockdown policies, which may or may not have been a response to the protest rallies.

Well aware of the risks of dissent in Xi’s China, protesters took to holding up blank sheets of paper, hoping that most citizens would understand the message but the absence of any actual language would stymie the police. That’s the tactic the young libertarians took to the bleachers. Of course, this being the United States and not China, the blank sheets of paper had a message about human rights on the other side. Journalist Ford Fischer posted video of the FedEx Field protest on Twitter and YouTube. Pictures were posted on the Reddit China page. Kent State Students for Liberty tweeted — don’t worry, there’s nothing wrong with your computer — a blank sheet of paper. 

Cato scholars have written about human rights in China many times. 

Earlier this afternoon, Sen. Pat Toomey (R‑PA) used his final speech on the Senate floor to criticize the Trump and Biden administrations’ bogus “national security” tariffs on imported steel and aluminum. As Cato scholars have noted, the statute used to impose these tariffs—Section 232 of the Trade Expansion Act of 1962—has been rife with abuse.

Sen. Toomey had three primary criticisms of the tariffs. First, the Trump-Biden steel and aluminum tariffs have hurt U.S. consumers and manufacturers in particular. Workers in steel-consuming domestic industries outnumber workers in steel production by a ratio of about 80 to 1. Raising input prices for U.S. manufacturers makes them less competitive in global markets.

Second, Sen. Toomey correctly noted that these massive tax increases were levied unilaterally by the executive branch under the false guise of “national security.” Yet even the Department of Defense estimated that the military only needs about three percent of total domestic steel production to meet its demands. It was never truly about national security; it was always about rank protectionism.

Third, Sen. Toomey noted that Congress and courts have been too deferential toward the national security pretext for import restrictions and thus there is essentially no limiting factor on the executive branch’s authority in this space. As a result, the Biden administration is currently considering utilizing the same “national security” statute to create a so-called “carbon club”—threat of tariffs on imported steel and aluminum—to force countries to reduce their emissions in the production of these products.

The entire speech is worth watching:

Earlier this year, Sen. Toomey was the keynote speaker at a Cato event hosted in conjunction with the release of a study entitled “The (Updated) Case for Free Trade” authored by my colleagues Scott Lincicome and Alfredo Carrillo Obregon.

Finally, it is worth noting that over his time in public life, Sen. Toomey has been a stalwart defender of the freedom to peacefully trade and invest across borders. His departure leaves a tremendous void for the noble cause of free trade. Hopefully others will pick up the mantle.

Axios reports that the Drug Enforcement Administration seized 379 million doses of fentanyl in 2022, which included 50.6 million fentanyl-laced counterfeit prescription pain pills and more than 10,000 pounds of powdered fentanyl (which can be mixed in with cocaine, methamphetamine, and heroin or used to make counterfeit prescription pain pills). As David J. Bier and I wrote recently, the vast majority of these drugs are seized at legal border crossings, mostly smuggled in by U.S. citizens working for Mexican drug cartels.

In its December 20 announcement, the DEA stated:

“In the past year, the men and women of the DEA have relentlessly worked to seize over 379 million deadly doses of fentanyl from communities across the country,” said Administrator Anne Milgram. “These seizures – enough deadly doses of fentanyl to kill every American – reflect DEA’s unwavering commitment to protect Americans and save lives, by tenaciously pursuing those responsible for the trafficking of fentanyl across the United States. DEA’s top operational priority is to defeat the two Mexican drug cartels—the Sinaloa and Jalisco (CJNG) Cartels—that are primarily responsible for the fentanyl that is killing Americans today.”

If this sounds like a broken record, it’s because law enforcement agencies have trumpeted such announcements for years. Earlier in this century, the DEA was announcing record heroin seizures. Non-medical drug users preferred prescription pain pills that made their way to the black market. But as policymakers and law enforcement punished prescribers and patients, and the DEA ratcheted down opioid manufacturing quotas, the cartels filled the void with heroin.

Law enforcement cannot avoid the “iron law of prohibition.” And lawmakers cannot repeal it. In our chapter entitled “The Overdose Crisis” in the latest edition of the Cato Handbook for Policymakers, Trevor Burrus and I explain:

The iron law of prohibition states that, all things being equal, as enforcement ramps up, smugglers prefer higher potency forms of a drug for the same reason those who sneak alcohol into a football game prefer hard alcohol in flasks to 12‐​packs of beer. The lethal logic of the iron law of prohibition means that we cannot enforce our way out of the opioid crisis. And if fentanyl smugglers become somehow easy to catch, there’s always carfentanil, which is about 100 times more potent than fentanyl and has already been showing up in America’s drug supply.

The iron law was already responsible for the rise in fentanyl smuggling before the COVID-19 pandemic. But pandemic-related disruptions in the movement of opium products and the supply of acetic anhydride needed to process heroin made fentanyl an attractive substitute for heroin and accelerated illicit fentanyl production.

Nitazenes are another category of synthetic opioids that are roughly 20 times the potency of fentanyl. They are already appearing in the toxicology studies of overdose victims in Europe and the U.S. Don’t be surprised if, in a few years, the press will sound alarms about a growing nitazene crisis. Then look for the DEA to announce record nitazene seizures. And, after nitazenes, there will be other drugs for the DEA to seize.

Reports of new and more deadly drugs, record drug seizures, and high-profile arrests will never stop—like a broken record—as long as drug prohibition continues.

Ever since the Covid-19 pandemic upended our lives, remote work has blossomed. Online job search company Ladders, for example, recently found that remote work opportunities in the summer of 2022 accounted for 36 percent of job openings on the site. And while remote work has declined since its Spring 2020 peak, the arrangement remains far more common today than it was before the pandemic (see Figure 1). New research from Stanford’s Nick Bloom shows that this substantial, three-year rise is the equivalent of 50 years of pre-pandemic remote work growth.

Remote work not only helped Americans weather the pandemic, but also spawned broader benefits for millions of American workers and the U.S. economy. For example, it gave many people the freedom to move and live where they want to live, not simply where their employer is located. One 2022 survey found that 11.7 percent of workers had moved or were planning to move because of remote work, a figure that corresponds to over 24 million Americans nationwide. Another found that 76 percent of remote workers preferred the arrangement over in-person work, and it has proven particularly popular among parents, who can more easily juggle work and family obligations. One recent study found that many workers are willing to trade wage increases for remote work because they so value the amenity.

Beyond the potential wage savings, many employers derive other benefits from remote work and have thus expanded their offerings in recent years. Recent research, for example, reports that remote work can boost employee productivity and retention. Employers also have access to a larger pool of workers, including formerly marginalized ones such as workers with disabilities. The proliferation of remote work also has made it easier for employers to hire workers located in different states or to abandon the expense of a physical headquarters altogether.

Yet, as we discuss in the Remote Work chapter of the new Cato book, Empowering the New American Worker, several government policies have not kept up with the rise of remote work and thus needlessly discourage it:

• State tax nexus. While most states tax employees by their state of residence (assuming that is where they conduct their work), four states determine this “tax nexus” based on where a worker’s employer is located via the “convenience of the employer” rule. With the rise of remote work, this rule has generated interstate taxation disputes, such as when New Hampshire sued Massachusetts in 2020 because the latter’s temporary “convenience” rules taxed roughly 100,000 New Hampshire residents working for Bay State companies. These rules can also greatly increase remote workers’ tax liability and subject them to double taxation. Thus, for example, an employee living and working in Maryland for a New York–based employer could be subject to both Maryland and New York state income taxes because New York is a convenience of the employer state, while Maryland is not.
• State tax withholding. State tax withholding laws can also be a barrier for remote workers who live in a different state from their employer. As Figure 2 shows, most states require employers to withhold that state’s taxes from employees after only one day of work there. And state tax policies also make remote work difficult for employers, as well. If even just one employee works remotely from a different state, companies may now be subject to that state’s corporate and sales tax regime.

• Federal tax uncertainty. Federal tax policy also confounds remote employees. For example, the American Institute of CPAs has voiced concerns about IRS tax treatment of remote employees that can discourage the adoption of remote work. It’s unclear, for example, whether employer‐​provided work equipment (e.g., a laptop) is a taxable form of compensation. Current policy also erroneously assumes that a worker’s home is in the same locality as his employer’s office, and that employers “gain nothing” from remote or hybrid work arrangements. Remote workers can therefore face additional tax burdens for engaging in what are now routine business transactions (e.g., regular travel to their employer’s office).

Fortunately, the book chapter provides commonsense reforms that would fix these problems and stop tipping the policy scales against remote work. This more neutral policy stance would help employees and employers more freely determine the work setup that best suits their needs, not the one that simply assuages various anachronistic policy concerns. Rather than being a blip during the COVID-19 pandemic, remote work has emerged as a popular and beneficial path for many American workers and the businesses that that employ them, producing broader economic benefits along the way. The arrangement’s certainly not right for everyone, but individuals should be making that decision, not the government.

You can check out the entire book here.

Just as I predicted back in October, Congress pushed its discretionary spending deadline back by one week, from December 16 to December 23. This comes as no surprise as congressional leadership is once again trying to ram through a massive omnibus bill before the year ends. The Friday deadline gives leadership leverage, as they threaten a partial government shutdown that might keep members of Congress in Washington over Christmas. Vote as you’re told, or you’re not going home is the name of this game.

Yet in the same vein that Congress managed to punt on appropriations when they were due on September 30, and again on December 16, Congress could punt on appropriations once more. The December 23 deadline is rather arbitrary—except for the fact that a new Congress will take power next year. As I’ve argued previously, the American people would be better served by Congress extending the continuing resolution into 2023 for the new House majority can take another crack at putting discretionary spending on a more responsible path.

Here are five quick things legislators and the public should know about what Congress would do with this lame duck omnibus:

Congress would spend too much, increasing deficits and adding to inflation. The omnibus would increase discretionary spending by about $200 billion or 13 percent, compared to extending the continuing resolution in effect now through the end of this fiscal year (September 30, 2023). Put another way, if Congress didn’t alter the current spending trajectory at all, the federal government would spend that much less.

Part of that increase comes from $85 billion in new emergency supplemental spending that should be offset with other spending reductions. Emergency spending is on the rise as lawmakers are increasingly using this designation—intended for severe, unpredictable, and urgent needs— as a piggybank for non-emergency priorities.

With the fiscal year (FY) 2023 deficit projected to clock in at more than $1.2 trillion as the Federal Reserve continues rate hikes to control inflation, Congress should not add fuel to the inflationary fire. The more responsible path would reduce discretionary spending (the one-third of the budget that Congress reviews each year) back to pre-pandemic levels, cutting crisis excess.

Congress would waive required PAYGO spending cuts. Previously enacted deficit-spending bills, including the $1.9 trillion American Rescue Plan Act, are set to trigger spending cuts of roughly $130 billion per year. The omnibus waives those required cuts for two years, increasing deficits by about $260 billion. Statutory PAYGO is a budget rule to encourage Congress to offset new mandatory spending increases or tax reductions by tracking related deficits and forcing sequestration (“automatic spending cuts”) if the scorecard shows a balance. The Heritage Foundation’s Matthew Dickerson has been beating the drum about PAYGO for some time now, asking Congress to put forth alternative, targeted spending reductions to avoid automatic cuts. And yet here we are, with Congress once again considering the myopic easy-way-out by waiving PAYGO as part of the omnibus spending bill.

With annual deficits projected at $1.6 trillion on average for each of the next 10 years, Congress should take steps now to rein in deficits and debt. Foregoing required spending cuts in FY23 and FY24 while at the same time increasing deficits yet further (see above) is heading in the wrong direction.

Most members of Congress will not read the bill before voting on it. As the Heritage Foundation’s David Ditch pointed out on Twitter, the 4,155 pages of legislative text are accompanied by another 2,670 pages of explanatory documents for 6,825 pages of omnibus content. Even the most dedicated members of Congress and their staff won’t be able to read through this massive spending package before they’ll be asked to vote for it before the end of this week.

And that’s intentional. The current legislative process does not intend for members of Congress to carefully deliberate policy decisions. The more time legislators would have to ponder the details of the bill, the more opposition to it would likely arise. Unless members of Congress refuse to pass bills they haven’t had a chance to read, this practice will continue. Unfortunately, some members prefer it this way. It’s more difficult for constituents to hold their representatives accountable for bad policy they had little chance of influencing.

Congress would waste taxpayer dollars on thousands of earmarks. Earmarks, also referred to as pork-barrel spending or the currency of corruption, are specific spending requests by members of Congress that supersede competitive award processes and other guidelines. They have a history of waste and abuse. Congress should ban earmarks and focus time and energy on fixing the federal government’s unsustainable spending trajectory instead. Some examples of earmarks in this omnibus include:

• $750,000 for the Connecticut Trolley Museum
• $1,000,000 for the Rock and Roll Hall of Fame and Museum in Cleveland, OH
• $4,000,000 for the Covina High School pool
• $5,000,000 for the Upper Columbia United Tribes Salmon Reintroduction Project
• $7,500,000 for the Jimmy Carter Presidential Library and Museum in Atlanta, GA

Congress would enact other legislation that is not related to appropriations, such as the Secure 2.0 Act. The omnibus is loaded down with additional legislation, such as the Secure 2.0 Act, which would make several changes to retirement account rules alongside policies to expand the welfare state. I wrote about three troubling provisions that look to hitch a ride on the omnibus here.

This monstrous omnibus is a perfect example of why lame duck legislating is terrible policy. Instead of rushing this bill through this week, Congress should punt on appropriations until 2023. Members should instead take time over the Christmas holiday to deeply reflect on their responsibilities and return refreshed in the new year with a strong fiscal agenda that would put the U.S. budget on a sustainable path and avert a future fiscal crisis.

The U.S. Border Patrol could soon lose its novel authority to expel border crossers back into Mexico under Title 42 of the U.S. code, a 19^th century public health law never previously used to remove people from the United States. Since March 2020, the agency has used Title 42 to ignore the normal process to which crossers are entitled under Title 8 of the U.S. immigration code and force them back into Mexico often within a few minutes of their arrests. The government is also flying some migrants directly back to their home countries under the rule.

Figure 1 shows the number of border arrests by processing type: Title 8 and Title 42. As it shows, the Title 42-era has seen a major increase in the number of total arrests. However, since April 2022, most illegal border crossers have not been subject to Title 42 expulsions. In October 2022—the most recent month available—only 37 percent of crossers were processed under Title 42 rather than Title 8. The number of arrests under Title 8 exceed the peak of arrests under Title 8 during the Trump administration.

In October 2022, 92 percent of expulsions were being used against “single adults,” adults traveling without children, and 91 percent over those expulsions are of single adults from Mexico and the Northern Triangle of Central America (Mexico, Honduras, and El Salvador). Families (adults with children) from these four countries account for another 6 percent of Title 42 expulsions and then all other families account for 2 percent of Title 42 expulsions.

With between a 91 and 96-percent expulsion rate, single adults from Mexico and the Northern Triangle of Central America are the most likely to be expelled of any group that Border Patrol arrests. Family units from the Northern Triangle and Mexico are the next most common with, as of October 2022, a 65-percent expulsion rate. Other single adults are expelled just 8 percent of the time and other groups (families and unaccompanied children) are expelled just 3 percent of the time. In other words, Title 42 is largely directed at single adults and families from the Northern Triangle and Mexico. Other groups are rarely targeted under Title 42.

Title 42 is a policy largely targeting single adults from Mexico and the Northern Triangle, but the number of single adults from these four countries has quadrupled alongside the increased use of Title 42—from an average of about 21,000 per month to nearly 80,000 per month in 2021 and 2022. Much of this increase preceded the rise in other arrests in 2020.

Title 42 does not deter single adults from Mexico and the Northern Triangle from crossing the border. Further evidence is that Title 42 has led to significant increase in recidivism—that is, the share of immigrants who were previously arrested the same year. The recidivism rate surged from about 20 percent in 2019 to 49 percent in 2022—meaning nearly half of single adults arrested under Title 42 from Mexico and the Northern Triangle were previously arrested under this policy. The remain in Mexico policy—which also involved sending people back to Mexico—also led to an increase in recidivism prior to the Title 42 policy.

The primary reason that Title 42 is not a good deterrent for this population is that they are not likely to be seeking to apply for asylum but rather to enter the country without being arrested, so that they can find jobs. Previously, single adults were likely to be incarcerated for an extended period after their arrest and possibly prosecuted criminally and sent to a U.S. prison. “They are sending back people very quickly, in hours,” said one Mexican seeking to cross. “The rumor is that chances of crossing undetected are higher, as you can try and try again without much consequences.”

As a result of the increasing number of attempts, the number of detected successful illegal entries (known as “gotaways”) increased dramatically during the Title 42-era to a level not seen since before the Great Recession. Under Title 42, the number of known gotaways—that is, detected crossers who were not arrested—grew from an average of about 12,500 per month in 2019 to an average of more than 50,000 in 2022.

As Figure 7 shows, the demographics of those being processed under Title 8 (the immigration laws) have changed dramatically from 2019 to 2022. In 2019, 85 percent of those processed under Title 8 were families and single adults from the Northern Triangle or Mexico. In October 2022, just 7 percent were those groups. Now 93 percent are from other countries or unaccompanied children. Unaccompanied children (minors traveling without their parents) cannot be expelled to Mexico because the Centers Disease Control specifically excluded them from that order in January 2021.

Immigrants from countries other than the Northern Triangle and Mexico are difficult to expel because they must be flown to their home countries. This is happening to some extent. The government averages about 120 removal and expulsion flights per month. At most, this is a capacity to fly out about 15,000 to 18,000 immigrants monthly. But because this includes expulsions of criminals and others from the interior of the United States, not just border arrests, the share of border crossers the government is able to fly out from the border is quite low. It also may not be possible for Border Patrol to detain someone long enough to transfer them to Immigration and Customs Enforcement for a flight out of the country.

It is not surprising that the government lacks the capacity to fly out this many immigrants from countries other than Mexico and the Northern Triangle because it has never in its history arrested so many immigrants from elsewhere. In October 2022, a majority of immigrants arrested at the border were from these countries. 

Table 1 shows the breakdown of arrests by country of origin and the number of Title 42 arrests (and expulsions). Setting aside Mexico and the Northern Triangle, immigrants from Cuba, Venezuela, and Nicaragua lead the way. These countries led by authoritarian governments have limited or no diplomatic relations with the United States and prevent easy removal flights to those countries. After those, Colombia, Ecuador, and Brazil form a sort of second tier.

The administration has managed to greatly reduce Ecuadorian and Brazilian crossings by convincing Mexico to require visas for travelers for these two countries, so they cannot fly to Mexico to cross into the United States. It tried the same approach with Venezuela, but Venezuelans switched to traveling by land. Colombia and Peru have an international agreement with Mexico that prevents this approach from being applied to them.

While this post has focused on Border Patrol arrests of people crossing illegally, Title 42 has also been applied to people who cross legally into the United States at U.S.-Mexico land ports of entry to request asylum. In 2022, the Biden administration has started to permit more people to apply for an exception to Title 42 so they can enter at ports of entry. But processing is still far below its peak when it decided to admit all Ukrainians at the U.S.-Mexico border. Only about 10 percent of crossers are permitted to cross legally in this way.

In 2022, the administration has placed a heavy emphasis on processing Haitians for asylum at ports of entry who had a long tradition of requesting asylum at the ports of entry before the Trump administration stopped processing them. This initiative has transformed the flow of Haitian crossers from over 99 percent illegal to over 98 percent legal. But setting aside Ukrainians, other nationalities have not had a similarly open process to them. The process requires a referral from a nonprofit organization at the border, and approvals are arbitrary and based on the government’s willingness to accept them.

The Title 42 policy has failed on its own terms. The number of crossers has increased, and the border is more disorderly than it was before. A better policy would focus on legal avenues for people to apply to travel to the United States. The administration is already showing how effective that approach can be with Ukrainians and Haitians. In October, it created a new process for Venezuelans. It is increasing H‑2B visas for the Northern Triangle countries. But much more can and should be done to make immigration legal, safe, and orderly.