The Trade and Welfare Consequences of U.S. Export-Enhancing Tax Provisions

May 1, 1994

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Stephen Tokarick, and Don Rousslang. The Trade and Welfare Consequences of U.S. Export-Enhancing Tax Provisions, (USA: International Monetary Fund, 1994) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The U.S. tax code contains two provisions that encourage exports by reducing the U.S. corporate income tax on export profits. An applied general equilibrium model of the U.S. economy is used to estimate the trade and welfare consequences of eliminating both tax provisions. We find that the provisions ameliorate the trade-discouraging effects of U.S. tariffs, but they also adversely affect the U.S. terms of trade to such an extent that eliminating them is likely to improve U.S. domestic welfare. While it is possible to find a “equivalent” tariff rate that replicates the effects on trade flows of removing the tax provisions, the welfare effects of a tariff differ importantly because a tariff interacts differently than the tax provisions with other distortions in the model.

Subject: Consumption, Exports, Imports, International trade, National accounts, Tariffs, Taxes, Terms of trade

Keywords: Consumption, Demand curve, Export profits, Export tax breaks, Exports, Global, Import tariff, Imports, Tariffs, Tax provision, Tax provisions, Terms of trade, Traded good, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/050
Stock No:

WPIEA0501994
ISBN:

9781451846904
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 41, No. 4, December 1994.

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