BCC's Foreign Trade Zone Mistake

At Tuesday's meeting of the Clay County Board of County Commissioners, our elected officials were asked to endorse the concept of Foreign Trade Zone services areas.

I can't figure out why the Board would vote its endorsement, and unanimously at that, of something that will only result in more revenue for Uncle Sam to waste.  And it won't be coming from foreigners, either. Uncle Sam's dipping his hand into our pockets again.

The Foreign Trade Zone service areas are just a tax adjustment, and we all no there's only one direction government knows how to adjust taxes. Now, when foreign parts are shipped to the United States, there's usually a 10 percent duty - or tax - paid upon entry. In the proposed Foreign Trade Zones (FTZs) service areas, that won't be the case any longer. Uncle Sam decided to adjust that duty and collect its pound of financial flesh as 2.5 percent on the locally-manufactured good when sold.

Sounds like a tax savings for someone, dropping from 10 to 2.5 percent, but it only sounds like one because the math doesn't make sense. Here's an example a business and math whiz friend of mine supplied.

My company is within an FTZ and we manufacture Whatzits, which we sell for $100. Of that $100, $5 will be my profit. Ten dollars goes to business overhead and $15 is the cost of material, and let's assume all of it imported. The remaining $70 is the cost of labor.  Sounds about average, right?

As currently stands, United States Customs would take my $15 worth of imported material and apply a 10 percent duty, collecting $1.50 at the dock. In a Foreign Trade Zone, the entire $100 my company receives for manufacturing and selling my Whatzit will be taxed at 2.5 percent, netting Uncle Sam $2.50.  Of that $2.50 tax, the actual foreign import is now taxed at its portion of the $100 at just 2.5 percent.

Instead of the federal government receiving the $1.50 it currently collects for foreign duty, that foreign import's contribution to the now $2.50 tax would be only 37.5, let's call it 38, cents.  The rest of that $2.12 Uncle Sam collects will come from my American company's profits, overhead and labor costs.

It's not just an extra dollar for Uncle Sam that gripes me, it's the way it will happen. Foreign Trade Zones will tax American industry and labor as if it's a foreign import while effectively lowering the tax on foreign imports.

That's not something I want my Board of County Commissioners endorsing.  It should reconsider and rescind its endorsement of this higher, misplaced and misnamed tax in the form of Foreign Trade Zones.