Wednesday, February 17, 2010

Cowen on the VAT

Tyler Cowen makes a case for raising taxes to deal with the long term budget problems. I assume he means some time in the next few years, not necessarily now.

I don't want to get into an overly technical discussion about the value-added tax, partly because I don't know enough about it to really discuss it thoroughly. My understanding is that it's basically like a sales tax, but it's collected along various stages of production, rather than just when the final consumer purchases the product. For various reasons it's considered to be an efficient way to raise revenue. It's widely used in Europe. Conservatives worry that it's so good at raising revenue that it will encourage politicians to increase the amount of government spending even more. Liberals worry that it would hurt the poor the most, since they spend a larger % of their income, whereas richer people save/invest more of theirs, and income from savings/investments are not taxed by a VAT.

I'm not entirely opposed to his idea, but I'm not yet convinced that people hate curbing spending more than they hate raising taxes. I'd probably be happy with a deal that does both of those.

1 comment:

  1. Ezekiel Emmanuel, Rahm Emmanuel's delusional brother who is too smart for his own good, thinks that the VAT tax is the answer to the health care problem. I wouldn't mind the introduction of the VAT, but I think it's only a band-aid for the unacceptable state of affairs that politics has fallen into. It's 'redonkulus' that Congress is as polarized as it is and is so easy to be brought to a complete halt. Whatever happened to the common good?