Saturday, May 1, 2010

VAT Poll Closed

My VAT poll closed. Exactly half of you so hate the income tax that you were willing to go for the value added tax if it meant that we could scrap the income tax. KT keeps making the point that we need to pay for the size of our government, so additional taxes are necessary because the alternative is eventual default on our debt, with attendant catastrophe. I think that we should try shrink the two decades of growth in government at all levels before we start adding taxes. Ultimately, the efficiency of the tax system matters. The less distortion of normal economic behavior imposed by a tax, the better, because it allows the economy to run most efficiently. In this sense the VAT is the way to go. Right now, we penalize investment and saving, Obamacare's taxation of dividends only making that worse. A VAT taxes consumption, so it would have the salutary effect of encouraging savings. Chances we will get a repeal of the income tax to go with that VAT? Slim.

1 comment:

  1. I didn't get to vote but totally agree with you. Taxing consumption is infinitely preferable to taxing work and investment.

    Expect the Deficit Panel to recommend huge VAT taxes on top of income taxes. Obama's spending is far too much for any VAT tax alone to pay for. For that matter, it's far too much for any combination of taxes to pay for. Monetization or default is inevitable.