Explain the difference between an export tax and an export subsidy. Which one do you believe to be the best, and why? Place yourself in the
role of a small Main Street shop owner. Does your perspective change? What if you are a moderately sized West Coast software company? Do your feelings about either option change if you are a
Midwest grain producer?
Answer preview
An export tax, also called a tariff is a tax placed on any exports or imports between different states (Fujiwara, 2016). Duties are imposed on imports and exports to act as a source of revenue as well as to protect domestic sources of income for a nation. On the other hand, the export subsidy is a government policy that encourages the exportation of goods from a state while maintaining the consistent sale of products in the state’s market. The system supports the purchase through the encouragement of low-cost loans, direct payments, government-financed international advertising, and tax reliefs. The export subsidiary ensures that foreign importers pay lesser than domestic consumers for products (Auerbach & Holtz-Eakin, 2016)…
