The Case Against a VAT
28th February 2010
It needs to be made.
But what Mr. Hubbard, Mr. Mankiw, and Mr. Cowen are talking about is a consumption tax and an income tax. There’s nothing to prevent the politicians from making this deal on reducing income tax rates to get a consumption tax, then turning around a few years later and raising the income tax rates back to what they were before, using the same approach that President Obama is now using as an argument for returning to the Clinton-era tax rates. If history is any guide, the consumption tax rate will get increased over time too, same as the Medicare tax rate and the Social Security tax rate have been. At least in the absence of a consumption tax, the politicians can’t keep raising the rate of it.