Professor Mark J. Perry's Blog for Economics and Finance
This Center for Freedom and Prosperity Foundation video explains why a value-added tax (VAT) would be a dangerous money machine for big government, like giving a group of alcoholics keys to a liquor store. The evidence from Europe also shows that VATs have actually lead to higher, not lower, income taxes.
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
10 Comments:
Yeah, we shouldn't do anything to correct the deficit.
Like, it was a great idea in 2001 to take out that credit card and give ourselves a ten year 10% tax cut. Trouble was, when the economy got going, the tax cut and deficit spending fueled the problem we have. We should have then closed the deficit, rather than widened it.
No one is a friend of taxes or tax increases. So, the answer is to cut some of the stupid deductions in order to close the deficit along with cutting agricultural subsidies.
The problem is that the deficit never goes away and taxes just keep rising.
No matter how much the U.S. congress collects in taxes, they spend more than they collect.
They then blame the problem on low taxes.
The problem never seems to be their out-of-control, irresponsible spending.
Amazing! It's never their fault.
It's always the fault of the greedy taxpayer who wants to keep his/her money.
We should be able to sue the U.S. congress for malfeasance and political malpractice.
I am not an advocate of the VAT but does anyone have a work-a-round to VAT rebates that our trading "partners" give to each other? U.S. exporters are at a distinct disadvantage trying to trade with nations having a VAT system.
VAT tax is good if you are an exporting country because the VAT tax is remitted to the manufacturer when it exports.
The reverse is also true: imports are assessed VAT taxes so that when they compete with locally manufactured products they compete on the same level playing field.
As we become more of an importing nation, and as we try to preserve or promote exports, VAT is not a bad idea. It taxes consumption, not savings, as well. It does have income distributive effects. Lower income people spend more on consumption relative to income than higher income persons and would therefore have an effective higher tax rate.
anon 12:48 "VAT is not a bad idea"
...... if it replace, not supplements, the income tax.
"Like, it was a great idea in 2001 to take out that credit card and give ourselves a ten year 10% tax cut. Trouble was, when the economy got going, the tax cut and deficit spending fueled the problem we have"...
On what planet did this happen?
Deficits wouldn't be a problem if such a large portion of the country's wealth wasn't squandered on inane projects and entitlement scams ...
Go ahead and steal a line from PJ O'Rourke why don't ya.
California is the perfect example of what people are syaing. Our top income tax rate is 8.3% which affects almost 50% of the population. Millionaires pay another 1% boost on top of that.
Sales tax varies by county, but after recent increases they're over 9%.
Property tax rates start at 1% and additional taxes are imposed at the local level.
Despite being among the most heavily taxed states, we are still running a deficit of 30% of the general fund.
Give California (or democrats) the power to tax, and they will NEVER give it up and still spend more than they take in.
Actually, California is a poster child for poor public finance.
A friend of mine, a very, very wealthy lawyer, pays very, very little real estate tax on his large house because he bought it before prop 13.
Person who buys from him pays full tax as does the person who builds a new house.
Screwy as all get up.
On top of it, the state plays games with the budget. This is going to be a disaster. Had the state been like every other state--even with high taxes--it would not face a looming crisis.
Very informative as most of the material on a VAT is positive and doesn't explain the downsides.
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