The Corner

Do We Need a New Way to Tax Citizens?

That’s the question asked by AOL News in the form of a four op-ed debate today. I make the case that our current financial situation is a problem of overspending rather than a revenue problem. Besides, the revenue from a VAT – a good tax which, I recently learned, might not even grow the government that much — wouldn’t even start to address our spending issue. I conclude:

In other words, if advocates of the VAT are serious about fixing our current fiscal crisis, they shouldn’t be asking for a VAT alone but for a VAT and a credible commitment (one that no one can renege on once the VAT is in place) to dramatically cut spending. Short of such commitment they can’t be taken seriously.

More importantly, focusing on revenue mechanisms such as a VAT in deficit-reduction discussions misses the fundamental point that spending, not revenue, is the cause of our financial troubles. Looking for new sources of revenue moves our attention from what needs to happen now: slow or stop spending increases and reform entitlements, sooner rather than later. For all these reasons, I am against the VAT.

The other three articles are very much worth reading:

Given the need to reduce the deficit and the unwillingness to cut spending, it’s almost inescapable, say Henry Aaron and Isabel Sawhill of the Brookings Institution.

This idea is bad in so many ways it’s hard to know where to start, says Ira Stoll of FutureOfCapitalism.com.

Don’t take anything off the table, says Donald B. Marron, a visiting professor at the Georgetown Public Policy Institute who was a member of President Bush’s Council of Economic Advisers.

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