A Trade Tax

Americans have long exhibited a list of economic theories which are totally impractical: Tax Cuts will pay for themselves; business expansion must be accompanied by expansion of business debt; somehow, future Salaries will pay for the Consumer debt which current Income will not pay; and We can get rid of the Trade deficit by growth in Sale of American Products. People wonder how We had reached the economic instability We enjoy today. The Answer is simple: We adopt the posture of an Ostrich every time We face economic troubles; if We cannot find Solution to the Danger, simply stick your Head into the ground. The Trade deficit of $62.2 billion in July must be answered; failure to do so will simply turn the Trade deficit into printed Dollars as well as the old traditional Printing Presses. My Reply would be the introduction of necessary, but temporary, Trade Permits for each and every foreign Trade of $1 per transaction; the direction (Import or Export) being immaterial. It would be a Tax applicable on All, and flow from Each, starting at the initial Importer or Exporter, and extend down to the Check-Out Counter (at least, in the domestic economy). Actual study indicates that it would cost the Average Consumer no more than about $8/Week, and Business about $80/Week on average. The collection of Taxes on Foreign Trade, though, would basically eliminate the inflationary impact of Trade.

Mark Perry has a good Post suggesting that the simple Volume of increased Trade is good for the economy, and that the Trade increase depends on the weaker Dollar. The traditional Answer would be that he is right, but I believe Exports depend far more on the level of American Imports, than they depend on the weakness of the Dollar. Foreign economies utilize American Exports to absorb excess American dollars more than they expect cheap Product from the United States. It is hard to understand the motivation behind Consumption patterns, but my designated Tax would strengthen the Dollar, and clarify the Trade relationship.

The primary rationale for the Trade Tax would be to raise revenues to pay for increased Government Expenditures; I have long discounted the ‘revenue-neutrality’ necessity claimed by Marginal Tax Economists. The counteraction of Inflation holds far more immediate Need, lessens the cyclical aspects of both Markets and the Economy, and reduces Expenditures on Product which has little impact of domestic economic performance in the Short-term; while possessing almost no impact in the Intermediate or Long-term performance. No one expects any Taxation outside Income or Capital Gains will impact economic growth, except and until such Taxation becomes especially large in amount. On the other hand, such Taxation is perhaps the best instrument to release Inflationary pressures without weakening the Currency. lgl