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Post by unlawflcombatnt on Feb 22, 2007 13:26:50 GMT -6
In the article A New Approach to Budget and Trade Deficits by William Hawkins (from American Economic Alert), a new solution is proposed for reducing our trade deficit and job losses from outsourcing. Hawkins proposes a "border adjustment" tax to counteract the use of VATs (Value Added Taxes) used by 130 of our trading partners. Such a tax would not only reduce imports and increase domestic production demand, the resulting increase in Federal revenue would also help balance the budget. The net effect of current VATs is to increase the price of American goods in foreign markets, and reduce the price of foreign goods in American markets. The current VAT system makes foreign imports cheaper for Americans than those same goods are in the home country's market. It also makes American exports more expensive to foreign countries than they are in the United States. The end result is that it is more profitable for foreign countries to sell their products to the United States. At the same time, it's also more profitable for American companies to sell their products in the United States. Thus it's more profitable for both American companies and foreign companies to sell their goods in the United States, rather than elsewhere. American goods have a price disadvantage when sold in either the United States or foreign countries. The proposed border adjustment tax would make foreign imports more expensive to Americans, without changing the price of American goods sold to American consumers. A New Approach to Budget and Trade Deficits
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Post by jeffolie on Feb 22, 2007 15:28:17 GMT -6
How does this differ from a tariff?
Where does the money from the border adjustment tax go? To our wasteful government?
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Post by unlawflcombatnt on Feb 22, 2007 16:08:27 GMT -6
How does this differ from a tariff? As far as I can tell, it's exactly the same thing as a tariff. (I also e-mailed the author about whether this is even legal under WTO rules.) Where does the money from the border adjustment tax go? To our wasteful government? Yes, it goes to the government. With a $9 trillion overall national debt, our government certainly can use the money. I think many conservatives and small government advocates consider this a better way to increase Federal revenue than increasing Federal income taxes. I would agree with that as well.
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Post by blueneck on Feb 23, 2007 22:01:04 GMT -6
This sounds similar to the "safety valve" legislation that Byron Dorgan has proposed, that whenever a trade deficit reaches a certain level with a trading partner, a tariff would kick in, and the proceeds going to industries harmed by unfair trade, and towards compensating or retraining workers whose jobs had been lost to offshoring.
Evan Bayh, and John Edwards have also discussed similar programs.
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Post by unlawflcombatnt on Feb 24, 2007 2:17:45 GMT -6
Blueneck,
Do you have any links to Dorgan's legislation? It remember hearing Dorgan mention something like this on Lou Dobbs.
If Edwards has mentioned something similar, that's even more points in his favor over Obama and Clinton.
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Post by blueneck on Feb 24, 2007 7:13:38 GMT -6
I am not sure if he has sponsored or submitted anything yet, I heard him discuss it on Dobbs as well.
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