Tax Effects of Import Restrictions According to Newsweek:

Lower-income families are hit hardest by trade restrictions, because they spend a far greater share of their earnings at the store. In a recent year, for example, households earning more than $50,000 laid out 3.3 percent of their disposable incomes on clothing, but households in the $20,000–$30,000 bracket spent 4.6 percent—and families earning $10,000 to

$15,000 spent 5.4 percent. The quotas and tariffs that force import prices up to protect U.S.

apparel jobs don’t matter much in Beverly Hills, but they put a big dent in pocketbooks in Watts.*

Let’s look more closely at the effects of tariffs and quotas on apparel purchased by different income groups. Assuming that 20 percent of the price of clothing is due to tariffs and quotas, calculate the dollar cost of tariffs and quotas on families making the following incomes. Then calculate the percentage of its income that each family pays because of tariffs and quotas.

*Source: Newsweek, July 12, 1993, p. 45.

1. Family income = $50,000; cost: ;

percentage of income:

2. Family income = $25,000; cost: ;

percentage of income:

3. Family income = $10,000; cost: ;

percentage of income:

4. Do tariffs and quotas hit lower-income families the hardest, as Newsweek maintains?