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The Trade and Welfare Consequences of U.S. Export-Enhancing Tax Provisions
Author:
Mr. Stephen Tokarick
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Don Rousslangnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 1994: Issue 050
Language:
English
Publication Date:
01 May 1994
DOI:
https://doi.org/10.5089/9781451846904.001
ISBN:
9781451846904
ISSN:
1018-5941
Pages:
28
Keywords:
WP; import tariff; export profits; tax provisions; demand curve; tax provision; export tax breaks; traded good; Tariffs; Exports; Imports; Terms of trade; Consumption; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 1994: Issue 050