I had urged him to write up an “explainer” type piece, summarizing key lessons on taxes. He came through. So far, his is the single best piece I’ve seen on the issue of border tax adjustment. I am working on some blog posts / podcast episodes to walk through these things as well.
I’m not going to bother excerpting from Scott’s piece, because for its full punch you need to just read it. He starts out with the tax incidence stuff–does it matter whether the government levies a 25-cent tax on the gas station or on the consumer? Then he ends up showing how a tax on imports coupled with a subsidy to exports won’t significantly change the volume of trade, so long as the currency adjusts. *That* is the key claim that guys like Krugman and others are citing, but nobody has slowly spelled out why it works.
To reiterate, Scott’s piece is the single best one I’ve seen so far, if you want someone to explain that initially counterintuitive result.
P.S. Scott is still wrong about the Fed.