[throwaway34241]

I can't upvote this enough, you've just described the actual solution to this problem recommended by economists (which of course no one is interested in). It's a bit depressing to have it be almost totally absent from the conversation even on HN.

It's called a border adjustment tax, you tax at point of sale and deduct domestic factors of production. So the tax is on what's remaining (profits and foreign production costs).

For the foreign part apparently the currency exchange rate appreciates to cancel out the tax so it doesn't actually have a protectionist effect, although that's certainly not obvious to non-economists.

It was actually floated as part of tax reform a while back, and got interest from economists on the left and the right, but corporate lobbying killed it.

Of course redoing the tax code isn't simple, but this appears to actually be a totally solvable problem that doesn't require the cooperation of every country in the world or legal battles with every company about where their profits are from.

[mcv]

> "For the foreign part apparently the currency exchange rate appreciates to cancel out the tax so it doesn't actually have a protectionist effect, although that's certainly not obvious to non-economists."

I'm particularly interested in this part, because this does seem to be the weakest part of my idea. Do you have any links with more information?

[throwaway34241]

Yeah that part isn't very intuitive (at least to me). This was actually proposed as part of a Republican tax reform attempt back in 2017 [1] but the idea was taken from Alan Auerbach who's the director of the tax policy center at UC Berkeley.

A lot of high profile economists on both sides of the aisle seemed to think the general idea checked out including Krugman who specializes in trade and is not known to be a cheerleader for Republicans generally [2]. Of course there was probably disagreement over the absolute rates but the general idea of it being a way to fix the tax haven problem while also being trade neutral seemed to be pretty widely accepted (although some people weren't sure if the currency adjustment would be immediate).

Unfortunately the Koch brothers and some other corporate groups were against it so it got killed, and what got passed was a bill that paid for a corporate tax cut by just borrowing money and didn't address the tax haven problem.

[1] https://en.wikipedia.org/wiki/Destination-based_cash_flow_ta...

[2] https://krugman.blogs.nytimes.com/2017/01/27/border-tax-two-...