Re: Grover Norquist, Mitch Daniels, and All VAT

by John Hood

Kevin & Co.: I’m sure I join many other Corner readers in my enjoyment of the VAT/anti-VAT dispute. It’s kind of the policy-nerd equivalent of Rock ’Em Sock ’Em Robots. It’s also probably about as productive a use of time. Lots of furious flailing, then one or both heads pop up, then you push ’em back down. Repeat until mom calls you for supper.

It reminds me quite a lot of the nationwide series of tax-reform debates that then–House Majority Leader Dick Armey had with various adversaries back in the mid-1990s. Armey advocated a flat tax. His rivals advocated a national sales tax. A fun time was had by all, as long as it was remembered that the debate was entirely theoretical. Neither plan would ever be enacted in pristine form. For sales taxers, repealing the 16th Amendment will prove impossible. For flat taxers, demagogues will retain their power to block key aspects of the plan for the foreseeable future.

As I spend most of my time studying state policy, I’ll simply point out that while one can make a case either for a state having a sales tax but not an income tax or a state having an income tax but not a sales tax, what matters most is that states have only one of them. Giving politicians more ways to gouge you is always worse than standing pat or giving them fewer ways. Tax substitutions don’t last.

In reality, no matter who controls Congress, we are unlikely to see either massive spending cuts or a new form of federal consumption taxation to replace current or prospective income taxation. History shows that budgetary balance, be it America’s fleeting moment in the late 1990s or the recent experience of countries such as Canada and New Zealand, is likely to occur only via a combination of multi-year spending restraint and robust economic growth. Similarly, if you want to run a surplus to pay down a national debt, you better keep the economy growing or it will prove impossible. The case for a “starve the beast” strategy — large tax cuts to force large spending cuts — doesn’t look so hot empirically, at least at the federal level. Score one for Williamson. But there’s also not much of an empirical case for conservatives being able to talk liberals into fiscal restraint by signaling a willingness to debate how best to raise taxes rather than whether to do so. Flinty resolve is the best weapon. Score one for Norquist.

The truth is that, even if Williamson were right, there is simply no way for the Republican party to gain and maintain significant political influence in Washington as an advocate of “not-quite-as-bad” tax hikes. It won’t win any support from the left or center, and it will destroy the GOP’s relationship with its base. I suppose there’s nothing that can be done to keep aging Republican politicos from currying favor with the Establishment by advocating “responsible” tax hikes. But I think it would be entirely fair to insist that they be fully retired from politics before doing so. Consider it the political equivalent of a final pilgrimage to Mecca, Graceland, or the River Iss.

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