Border Tax Adjustments Won't Stimulate Exports

Abstract

The claim that a border adjustment would permanently boost exports and reduce imports is often presented as an argument for consumption taxation. In reality, the economic case for consumption taxation, which is quite compelling, has absolutely nothing to do with border adjustments. The genuine advantages of consumption taxation - more efficient allocation of resources across the life cycle, increased capital accumulation, and a simpler tax system - need no boost from misconceptions about border adjustments.