Our income tax system has no effect upon pricing and thus is not disadvantegous wrt the rest of the world.
Actually untrue, as the effect in exchange rates acting in reaction to exports is the depreciation of the American dollar against foreign currencies causing an outflow of capital asset investments away from the U.S. to move trade flows toward balance.
Removing the effect of taxation from our exports causes foreign currency exchange rates to depreciate in relation to the American dollar (i.e. our dollars appreciate against their currencies) pulling more investment into the U.S. to move trade flows toward balance.
Actually untrue, as the effect in exchange rates acting in reaction to exports is the depreciation of the American dollar against foreign currencies causing an outflow of capital asset investments away from the U.S. to move trade flows toward balance.A "No IRS!" t-shirt to the first person who can correctly diagram this sentence. I don't think it can be done.
Removing the effect of taxation from our exports causes foreign currency exchange rates to depreciate in relation to the American dollar (i.e. our dollars appreciate against their currencies) pulling more investment into the U.S. to move trade flows toward balance.I think you may be wrong here. If there is more foreign investment in the U.S., our trade balance (merchandise) would be further from balance, not closer. And if the dollar appreciates, foreign imports are cheaper and our exports are more expensive, moving our trade account further from balance.
Oh, I beg to differ. Our system of taxation MOST CERTAINLY impacts the price of goods in the world market.
There is an arcane distinction here, between an indirect tax (such as the VAT) and a direct tax (such as the Corporate Net Income Tax). The WTO has ruled that an indirect tax is border adjustable without penalty. On the other hand, the CNI is not permitted to be adjusted at the US border...as a consequence, U.S. goods, to the extent that they carry any portion of the CNI burden, are disadvantaged in the global marketplace.
This distinction has been at the center of a trade dispute that is nearly 35 years old. Moreover, our global system of corporate taxation, as compared to a territorial system, further disadvantages goods produced by US companies....based here or overseas. This reality has lead to the corporate inversion phenomenon. Moreover, our system of corporate taxation increases the hurdle rate of return that any project contemplated within the borders must vault before it is undertaken.
No...the US system of taxation significantly disadvantages US goods in the world market, and we MUST stop the stupidity. The FairTax is the only way to truly unburden our exports...and entice foreign direct investment to the US.
Please see: The Role of Extraterritorial Income Exclusion in the International Competitiveness of US Companies, http://www.finance.senate.gov/sitepages/2002HearingF.htm/hearing073002.htm
When we export we are selling dollars. There is greater demand for dollars thus the currency APPRECIATES not deprecitates. I think you are trying to describe import effects.
If you remove non-income tax taxes from exports the other countries will remove their VAT taxes which will leave you with no change.
You are postulating a price effect on exports from income taxes which I do not believe exists. Other taxes, representing a true cost of production, do cause export prices to be higher.