Time for a Value Added Tax (VAT)?

Bruce Bartlett:

GROWING numbers of policy analysts and politicians are saying that it may finally be time to consider a value-added tax as part of our federal revenue system. In years past, I would have been in the forefront of those denouncing the idea. But now, reluctantly, I have joined the pro-V.A.T. side. Here’s why.
There are many arguments against a value-added tax, which is essentially a sales tax that applies at each stage of production. It is costly to put into effect, and it hits the poor and the elderly hardest because they spend a higher percentage of their income.

Why is Tommy Thompson Sad?

Michael F. Cannon:

Finally, Thompson voiced his regret just one day after Medicare’s trustees announced that the drug benefit by itself has an unfunded liability 60 percent larger than that of the entire Social Security program. (The unfunded liability for all of Medicare is nearly six times that of Social Security.) Medicare’s financial outlook has grown so dire that its two public trustees broke with the trustees who are members of Bush’s Cabinet to say that it is in far worse shape that Social Security.

Tax Foundation on Colorado’s TABOR

The Tax Foundation:

The state of Colorado is under assault. Opponents of Colorado?s Taxpayer Bill of Rights (TABOR) are waging a well coordinated but misleading attack on Colorado?s reputation. This attack takes the form of a number of rankings and statistics that purport to show that the Taxpayer Bill of Rights has decimated Colorado. These rankings and statistics are based on the assumption that if Colorado ranks poorly on things like the adequacy of prenatal care and education spending, then Colorado is failing to adequately care for and educate its citizens, and that the Taxpayer Bill of Rights must be to blame. A closer look at the attacks shows that they fail to prove that the amount a state spends on health care and education determines quality, and they also fail to tell the whole truth about the rankings and statistics of the state of Colorado.

Cowen & Sawicky on Tax Reform

Tyler Cowen & Max Sawicky:

Alan Greenspan has called for a consumption tax and President Bush has toyed with the related idea of a national sales tax. These proposals have some ideal economic properties but the politics don’t work. Consumption taxes are largely invisible; you don’t see what you pay on a yearly tax return but, rather, it is absorbed in the price of goods. Not surprisingly, Western European countries have both consumption taxes and high rates of overall taxation. Flat taxes bring some benefits but wouldn’t drastically lower the costs of our tax code; the biggest difficulty in filing your return is calculating your income.
I recommend starting on the expenditure side. Let’s gradually freeze Social Security benefits in real terms, introduce more market incentives to health care, redo the Medicare prescription-drug bill, and cut discretionary government spending. We should admit more revenue-positive immigrants as well and stop subsidizing the defense of Western Europeans.

Greenspan Backs a Consumption Tax

Edmund L. Andrews:

“Many economists believe that a consumption tax would be best from the perspective of promoting economic growth – particularly if one were designing a system from scratch – because a consumption tax is likely to favor saving and capital formation,” Mr. Greenspan said.
But the Fed chairman warned that shifting to a new system would raise difficult “transition issues,” and he cautioned against “going for purity” in any kind of tax overhaul.