Don’t Count Your Chickens…

April 23, 2020

A couple of weeks ago, we wrote about the great toilet paper shortage of 2020. It gave us a great opportunity to indulge in the sort of lowbrow humor that made MAD magazine such a hit with 10-year-old boys. The problem turns out to be simple. Toilet paper makers produce two separate products for two separate markets: the plushy stuff we use at home and the scratchy stuff we find at offices and businesses. With coronavirus stay-at-home orders keeping us housebound, we’ve upset that usual balance of supply and demand.

But toilet paper isn’t the only commodity with a scrambled supply curve right now. This week’s story involves a much-loved delicacy invented by Teresa Bellissimo at the Anchor Bar in Buffalo, NY, and an odd tax that has nothing to do with her creation. That’s right . . . coronavirus has created a national chicken-wing glut, at a time when politicians and economists are fighting over a “chicken tax” you’ve probably never heard of!

First, the glut. Why are there so many wings? The problem here stems from the same imbalance that emptied toilet paper aisles. Most people don’t get their wing fix at home. They chow down at bars and restaurants, usually in front of TV sports. Suppliers were “locked and loaded” for March Madness. But now we’re all cooped up at home. Restaurants, bars, and even March Madness itself have all gone dark. Demand for the tasty snack has plummeted. The wholesale price of wings has dropped over 20%, from $1.60 to $1.25 per pound. And commercial packaging won’t fly for home kitchens.

(While we’re on the topic, and don’t get us started on so-called “boneless” wings. There’s no such thing as a boneless wing. It’s just something menu planners hatched up so grownups wouldn’t be embarrassed ordering chicken nuggets. As if there’s something wrong with chicken nuggets to begin with. Also, do you dip your wings in blue cheese? Or do you prefer ranch dressing because you think blue cheese smells like feet?)

Now for the tax. After World War II, “factory farming” turned chicken, which had been a delicacy in Europe, into a staple. We were producing enough of it here to satisfy demand in Europe, too. But overseas governments naturally wanted to protect their own farmers. So, in 1961, Germany and France slapped a tariff on American chicken. Deep-fried diplomacy failed to resolve the dispute, dubbed the “chicken war.” In 1964, President Johnson retaliated with a 25% tariff on imported chicken — and, among other things, light trucks and vans. (Definitely not chicken feed!)

Of course, just like every party has a pooper, every tax has a loophole. (In trade, it’s called “tariff engineering.”) In 1972, Ford and Chevy realized they could import foreign-built trucks with no cargo bed or box at a 4% tariff, then finish the vehicles here to avoid the remaining 21%. (Jimmy Carter closed that loophole in 1980.) Today, Ford imports Transit Connect vans from Turkey with rear seats to avoid the tax, then strips them out before sale. Mercedes imports parts for its Sprinter vans to assemble in South Carolina, then sells the final product as “made in America.”

That same tariff is still in effect, 55 years later. Donald Trump, never one to walk on eggshells, has even tweeted praise for it, arguing that if we had it in place on passenger cars, General Motors wouldn’t have had to close factories in 2018. (Right now it may not matter, considering coronavirus has run new car sales off the road along with chicken wings.)

Today it looks like most of the excess wings will wind up frozen for a day, hopefully not too far away, when they can be served at your favorite local pub. Until then, we’ll be keeping an eye out for any sort of tax planning developments to help ease your way through the crisis!

Don’t hestitate to contact us.

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