TARIFFS ARE REGRESSIVE
By Alan Miklofsky
Tariffs tend to impact middle- to low-income consumers more significantly than higher-income consumers. Here’s why:
1. Proportion of Income Spent on Necessities: Middle- and low-income consumers typically spend a larger portion of their income on necessities like clothing, shoes, and other consumer goods. When tariffs increase the cost of these goods, these consumers have less disposable income left for other expenses or savings. 💵💸 Higher-income consumers, on the other hand, spend a smaller proportion of their income on these items, so the relative impact of price increases is less significant. 💰
2. Limited Substitution Options: Middle- and low-income consumers often have fewer options to substitute higher-cost goods with cheaper alternatives. They might rely on affordable brands that become more expensive due to tariffs, while higher-income consumers can more easily switch to other products or brands without drastically changing their lifestyle. 🛍️💲
3. Price Sensitivity: Lower-income consumers tend to be more price-sensitive because even small increases in prices can significantly affect their overall budget. Tariffs that lead to higher retail prices can force them to reduce consumption or downgrade to lower-quality products, which can affect their quality of life. 📉💵
4. Lack of Access to Capital: Higher-income individuals may have access to more financial resources and credit, allowing them to absorb short-term price increases without immediate changes to their consumption habits. 💳💵 In contrast, middle- and low-income households often lack such flexibility, making them more vulnerable to price fluctuations caused by tariffs. 📉
5. Cumulative Effects: For middle- and low-income consumers, the impact of tariffs is cumulative. If tariffs are imposed on multiple categories of goods, the overall cost of living can increase substantially. 💰💸 Higher-income consumers, however, may only feel a minor impact on their overall expenses. 💵
Conclusion: Tariffs are regressive, meaning they take a larger percentage of income from those who have less. This disproportionately affects middle- to low-income consumers, making it harder for them to maintain their standard of living when tariffs lead to higher prices. 💸📉