The city of Fort Payne, Ala., once dubbed itself “the official sock capital of the world.”
The sign off Interstate 59 is now gone. So, too, are thousands of textile jobs at the local hosiery mills that once produced half the socks sold in the U.S.
Most of the factors driving the decline are well-documented – cheap foreign labor, high cotton prices, and lax trade rules. Another receives less scrutiny: our tax code.
For decades, the U.S. tax code has rewarded foreign imports and punished American companies that sell things in foreign markets. That discrepancy helps fuel a massive trade imbalance with China that exceeds $300 billion annually.
Open trade has been fundamental pillar of the American economy since our earliest days as a British colony. But open trade isn’t necessarily fair trade, and for too long, our tax code has imposed penalties on domestic goods and services that we don’t slap on foreign imports.
Under the current tax code, the government takes 35% of any profits an American company generates from selling American-made socks here or abroad. But retailers in the U.S. can deduct the cost of foreign-made socks sold here, making them even cheaper for American consumers.
This ongoing quest for “Everyday Low Prices,” fueled by cheap foreign imports, has been the ultimate race-to-the-bottom for American workers. The inflation-adjusted cost of apparel, for example, are essentially flat over the last three decades, according to the Bureau of Labor Statistics.
That price deflation has pinched middle-class wages. Middle-class households make less now than they did in 2000, according to the Pew Research Center, and their median net worth has barely budged since 1983. That wage stagnation is even more painful because the cost of many big-ticket items – homes, college and health care – are rising much faster than they used to…