1. Effects of Taxes on Exports and Imports Group 1 Sylvia Salinas Catherine Wohletz Daniel Grund Takuro Hatanaka Josh Friedberg Julio Urenda

2. Objective Why: We want to understand how domestic taxes, and tariffs effect imports and exports. What : Determine the correlation between domestic taxes and net exports and imports. How: We will collect data on taxes, GDP, and exports. We will setup a valid model to extrapolate the relationship.

3. Initial Hypothesis As Domestic taxes increase, we will find that imports increase and exports will decrease.

4. Gathered Data GDP from 1929 to 2001 (source: Bureau of Economic Analysis) Domestic taxes form 1934 to 2008 (Source: The Whitehouse Office of Management and Budget) Exports and Imports from 1929 to 2001 (source: Bureau of Economic Analysis) Corporate Profits after taxes from 1929 to 2001 (source: Bureau of Economic Analysis) Personal Disposable Income from 1929 to 2001 (source: Bureau of Economic Analysis) Custom and duties from 1940 to 2008 (Source: The Whitehouse Office of Management and Budget)

5. Domestic Taxes, Exports, and Imports (in billions of dollars) vs. Years

6. Domestic Taxes, Exports, and Imports (as a percentage of GDP) vs. Years

7. The t-stat on corporate profits and domestic taxes are not significant at the 5% level. The t-stat on customs is significant at the 10% level.

8. All variables are significant at the 5% level.

10. The customs percent is not significant.

11. All of the values are significant at a 5% level, but it appears that domestic taxes increase exports...but there is more than one way to skin this cat.

12. The domestic taxes with a four year lag is significant at the 5% level, and has the expected sign on the coefficient. It also renders the current year’s domestic taxes insignificant at the 10% level.

14. A two year lagged value of domestic taxes also proved relevant in the case of imports, bringing R-squared from 0.934 to 0.954

15. Results As Domestic taxes increase, exports decrease with a lag of 4 years. Imports are reduced by domestic taxes with 2 years of lag, but respond immediately to tariffs with a much greater coefficient.

16. Conclusion Imports are significantly deterred by tariffs, and to a lesser degree by domestic taxes with a two year lag. Exports are significantly reduced by domestic taxes with a lag of four years, but they are not effected by the tariffs. Exports are positively correlated with domestic taxes in the current year; presumably the higher taxes are a result of the higher exports.

17. QUESTIONS ?