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Border Tax Adjustments: Assessing Risks and Rewards

Author

Listed:
  • Gary Clyde Hufbauer

    (Peterson Institute for International Economics)

  • Zhiyao (Lucy) Lu

    (Peterson Institute for International Economics)

Abstract

Border tax adjustments—achieved by denying business deductions for imported goods and services and excluding exports of goods and services from the tax base—will be hotly debated as a key feature of the cash flow tax proposed in the Blueprint of House Speaker Paul Ryan and Ways and Means Committee Chair Kevin Brady. This Policy Brief examines border tax adjustments from the perspective of their compatibility with World Trade Organization (WTO) rules, their possible impact on the dollar exchange rate, and the resulting effects on tax incidence brought by exchange rate movements. The authors conclude that not only are dogmatic assertions on the WTO compatibility of BTAs unwarranted but also are confident predictions of the induced exchange rate impact. The Trump administration and Congress will need to evaluate BTAs from different angles, realizing that decisions taken will carry the US economy into uncertain terrain.

Suggested Citation

  • Gary Clyde Hufbauer & Zhiyao (Lucy) Lu, 2017. "Border Tax Adjustments: Assessing Risks and Rewards," Policy Briefs PB17-3, Peterson Institute for International Economics.
  • Handle: RePEc:iie:pbrief:pb17-3
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    Cited by:

    1. Bob Carbaugh & Toni Sipic, 2017. "Paying for the Trump Wall Boondoggle," Challenge, Taylor & Francis Journals, vol. 60(4), pages 386-396, July.
    2. Roman Stöllinger, 2020. "Getting Serious About the European Green Deal with a Carbon Border Tax," wiiw Policy Notes 39, The Vienna Institute for International Economic Studies, wiiw.

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