Auerbach’s Tax and the Clone Wars

Menzie Chinn introduces a new asset to economist blogging. Joel Trachtman provides an excellent discussion of whether the Destination-Based Cash Flow Tax violates WTO rules concluding that it does. He adds:

If enacted, the plan would likely lead to lengthy litigation at the World Trade Organization. A (likely) ruling that the tax is an income tax, and is applied in a discriminatory manner, would mean that exempting exports would be considered an illegal subsidy and taxes on imports an illegal tariff. This could lead to trade sanctions against the U.S. and open the door to counter sanctions and the start of a trade war.

President Trump strikes me as someone who could care less about WTO rules. And starting a trade war fits his grand design of goverance. As Yoda noted:

Begun the clone war has

President Trump is Lord Palpatine.