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So the Trump administration has floated the idea of a 20% tariff on Mexican imports. Part of the Justification for this, was Sean Spicer's statement that (Emphasis mine)

"Our country's policy is to tax exports and let imports flow freely in, which is ridiculous. But by doing it that way we can do $10 billion a year and easily pay for the wall. Just through that mechanism alone,"[1]

Per Article 1 Section 9 of the constitution

No Tax or Duty shall be laid on Articles exported from any State.[2]

Does that clause not apply to exports outside of the United States as opposed to interstate trade (ex: KS wheat exported to Colorado)?

  • I don't have real research or sources, which is why this is a comment; the Constitution is a federal document, so it could very well be that states themselves can tax exports, but the federal government cannot. – Delioth Jan 26 '17 at 22:19
  • No the states cannot tax exports either. – K Dog Jan 26 '17 at 22:33
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    I was under the understanding that the US subsidises rather than taxes many of its exports (despite its promotion of free trade). – william cooper Jan 27 '17 at 8:34
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    @williamcooper that's really not the case. There are very few things that are subsidized in the US, the biggest of which is probably ethanol, but that is for US consumption. Other Ag production is also subsidized however. – K Dog Jan 27 '17 at 13:41
  • @Delioth The Constitution is indeed a federal document in the original meaning of the word "federal". It defines the relationship between the states and the national government, explicitly prohibiting states from certain powers that are given to the national government. So it's wrong to say that it doesn't constrain state powers. – Monty Harder Jan 27 '17 at 15:55
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I don't know what Spicer is going on about here, maybe on repatriation of earnings. But's it's sloppy. The US cannot tax an export, as you stated the Constitution states

All exports are by definition outside of the US.

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    My random guess (I can't get inside Spicer's head, yet), is that he may have been referring to other countries taxing US imports. No other possible interpretation seems to make sense. – user4012 Jan 27 '17 at 12:09
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    @jwenting it's much more probable that he simply misspoke – K Dog Jan 27 '17 at 13:43
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    @T.E.D. - whether he's familiar enough to know that it's unconstitutional is less relevant, the point is, he was presumably referring to something that exists and not to something hypothetical. – user4012 Jan 27 '17 at 15:58
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    @T.E.D. - it doesn't have the benefit of surviving basic English analysis. He was referring to status quo (policy IS), not some hypothetical new state. Presumably, status quo is already constitutional. – user4012 Jan 27 '17 at 16:06
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    There are lots of taxes on exports. Payroll, property, income, etc. They is no duty on them but there are plenty of taxes. – SoylentGray Feb 3 '17 at 20:21
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The United States taxes global income (as opposed to territorial income as in most countries). So the income of the export is taxed in the US when it is repatriated to the US. Some companies leave their foreign revenues overseas in order to avoid that taxation.

Note that it is the income that is taxed, not the export. Income is taxable no matter the source, as per the sixteenth amendment.

  • So these could be taxes imposed on companies based on their exports? – ndenarodev Jan 27 '17 at 13:56
  • This sounds plausible. It is a tax on all economic activity including sales abroad. But who can get into the head of Spicer to really know... – Floris Jan 27 '17 at 21:15
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The US states typically apply a sales tax or 'use tax' to components which are not consumed in exports. As such, exports will contain some small component which consists of, say, the sales tax paid on a computer amortized over 4 years or the paper folders used in record keeping.

This is the distortion that a VAT (a consumption tax) eliminates, by allowing that tax to be backed out of exports since the final consumer pays the tax and not exports. Imports and domestic products are thus on a level playing field (if the VAT is 10%, the import gets taxed 10% at retail and so does the domestic product). See, for example, this Forbes article debunking Trump's claims that VAT is in any way unfair. It also allows governments to crank up or down the tax extraction knob without unduly affecting trade, which is perhaps a legitimate objection- that it makes it easy to increase taxes. Another criticism, typically from the other side politically, is that it is a regressive tax- usually a flat percentage of consumption.

The amount of state tax in such exports is pretty small but probably not negligible. In Canada, prior to introduction of the VAT (called GST) there was a hidden 12% (usually) federal manufacturer's sales tax that caused a relatively large distortion in favor of imports, but thankfully that is long gone, and in many provinces the provincial sales tax has been combined into a single visible tax at consumption for most products.

The US has no federal sales tax and it is probably virtually impossible to imagine all 50 states agreeing on a harmonized federal-state tax system, so implementing a VAT is difficult in the US, but perhaps not impossible.

There appears to be a current and very deliberate attempt to obfuscate what a VAT actually does (create a level field and back out taxes from exports, allowing recipient countries to impose their own taxes at consumption) and conflate it with protectionist measures such as straightforward tariffs or the proposed complex "border adjustability" tax, the latter explicitly prohibited under WTO rules precisely because it is not a level playing field (imports are taxed and exports are subsidized).

Some countries, in particular those with internal subsidies or currencies that are not fully convertible do tax and/or apply quotas to exports but I'm not aware of any commodities that are treated that way in the US.

  • Thank you for this answer. Interesting. Can you take a look at your first sentence? It may need a little editing. Also could you provide an example? And maybe a citation. – K Dog Jan 27 '17 at 22:40
  • @KDog Hopefully I made it a bit more clear. A 'use tax' is the equivalent to sales tax paid (mostly by businesses) on out-of-state purchases. In theory consumers should pay it, but it is seldom enforced. Businesses are compelled to report and remit. – Spehro Pefhany Jan 28 '17 at 1:57
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In Article 1 Section 8,the word Export refers to international sale of goods. Not interstate. Sale across state lines is not export. The clause was specifically added because Virginia, which was still shipping tobacco to Britain, was considering not signing the constitution..... Now for the real question.... Which exports are being taxed?

  • I'm skeptical about J McCoy's first assertion here. If that clause doesn't mean that Connecticut cannot tax goods shipped from New York (at a rate higher than that imposed on similar goods made in Connecticut), is there another clause that does? – Anton Sherwood Jan 27 '17 at 4:19
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    @AntonSherwood "No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports..." Article I, Section 10, Clause 2. Also, Article 1, Section 8, Clause 3 (the 'Commerce Clause') grants the power "to regulate commerce with foreign nations, and among the several states, and with the Indian tribes" explicitly to the U.S. Congress. – reirab Jan 27 '17 at 20:41
  • @J This answer would probably be improved by providing a source. For example here's one that discusses it in some depth. – reirab Jan 27 '17 at 20:56
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IIRC, military exports are often taxed. The rationale is that the US Army paid for the initial development, and the government should recoup some of those R&D costs when other countries benefit.

  • I'm not that familiar with it, but I'd guess that it's considered an IP license fee for patents owned by the government or some such thing rather than an export tax. As the original question mentions, taxes on exports are indeed explicitly unconstitutional. This was a precondition on some Southern states ratifying the Constitution. Of course, there's the whole ITAR licensure process to go through. – reirab Jan 27 '17 at 20:55

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