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A Macroeconomic Perspective on Border Taxes
- Brookings Papers on Economic Activity
- Brookings Institution Press
- Fall 2017
- pp. 433-447
- 10.1353/eca.2017.0018
- Article
- Additional Information
ABSTRACT:
The debate on corporate tax reform in the United States has included arguments for a border-adjustment tax that would effectively raise the tax on imported inputs and provide a subsidy to exports. This policy is equivalent to other uniform border taxes, such as a combined import tariff and export subsidy, and a uniform value-added tax and payroll subsidy. In this paper, I argue that, contrary to popular arguments, such taxes are not neutral in either the short run or the long run, and they have significant consequences for international trade.