Comment by jbeam
16 days ago
My place hasn’t changed at all. Everything I’ve said is internally consistent. You are welcome to view any form of taxation as an impediment to “free trade” but that’s not how competition works. Feel free to continue believing that taxation is inherently protectionist, I’ll leave it at that.
There's "taxation", and then there is "taxation". VAT is an incredibly aggressive and overreaching version of "taxation", and it has severe implications on free trade with Europe. I'm not sure why you won't acknowledge this.
And by the way - plenty of economists view taxation as impediment to free trade.
I’m not sure why you won’t acknowledge that a tax that affects domestic and foreign companies equally is not protectionist. But here we are.
I’m not saying that taxes don’t have an impact on the economy, or the business environment, or growth, or profits…of course they do! Maybe the tax will lower demand which makes investment less appealing, and so less investment from Americans happens as a result. But there's also less investment from the Europeans in that case! And most of all, it has nothing to do with the competitiveness of American products in the European market, because the European products face the same tax. VAT does not distort the relative price between European and foreign products.
If you want to say that tax revenue is used for subsidies that are anticompetitive — well money is fungible, you can’t blame that specifically on VAT revenue, and you should be making an argument against subsidies, not the VAT. But then you will need to address the many ways in which the US subsidizes its own industries.
Have a good day!