The Corner

Re: The VAT and Exports

Thanks for the plug, Veronique, and for bringing that Alan Viard article to my attention. Viard is concerned to refute one argument for a VAT: that it is worth supporting because (assuming it is “border-adjusted”) it would involve taxing imports and rebating taxes on exports and thus reduce the trade deficit. He makes a strong case that this method of changing the trade balance would not work (and that it’s not a worthwhile goal). I think Viard would allow, though, that under certain circumstances a VAT could reduce the trade deficit in a different way. If, for example, it replaced income taxes and thus, compared to the status quo, encouraged saving, it might reduce the trade deficit. But of course this is true of any form of consumption tax, not just the VAT, and it has nothing to do with border adjustment.

Ramesh Ponnuru — Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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