February 4, 2011
WE ARE ALL NEOCOMISTS NOW::
Value added tax: Senate weighs a tax reform Reagan once shunned (Mark Trumbull, Feb 2, 2011, Yahoo News)
Tax policy experts at the hearing, including a prominent conservative, said the idea should be a centerpiece of tax reform."All roads are going to lead to a VAT," said Lawrence Lindsey, a former top economic adviser to President George W. Bush. "If we want to be competitive, that's where we're going to end up."
Here's the chain of logic.
Both sides say the current tax code is a complex mess that harms US job growth, while other nations are using better-designed tax systems to lure corporate investment.
Tax reform could help the economy, and by making tax collection more efficient it also has the potential to reduce the persistent federal budget deficit. Politically, too, tax reform appears easier for both parties to strike a deal on than, say, health care reform.
A makeover of the tax code could occur simply by streamlining existing rules for personal income and corporate taxes. The VAT would add a further twist: Proponents say it could help to roll back incentives for corporations to add jobs and factories outside the US rather than inside.
"It really is our central economic issue," Mr. Lindsey said during the discussion with senators.
No one argues that a VAT alone will solve US competitiveness problems. But Lindsey said that such a tax, levied on all business receipts, could be "border-adjusted" so that it didn't tax exported goods. That way US exports wouldn't be taxed twice – once in the US and once by another nation's VAT.
Other changes – such as aligning corporate tax rates closer to rates in other nations – could also help level the field, witnesses at the hearing said.
We're not arguing about where we're headed, just how soon we get there.
