The Agenda

Herman Cain: Against a VAT Before He Was For It

Here’s Herman Cain, one year ago, on the topic of a tax system that combines sales tax with income tax:

In every country that has established a VAT with the promise of reducing its national debt, the VAT has eventually gone up or expanded on top of the existing tax structure.* After discovering many of the tax grenades in the recently passed health care deform bill, which is already driving costs up and access down, it would be real easy for an overzealous bureaucrat to insert the language in the legislation “national retail and wholesale” tax…

Giving the administration and Congress another tool to tax us and confuse us is like giving an alcoholic a key to the liquor store with no supervision, only to discover that he locks the door after he is safely inside.

So a year ago, Cain thought it was too dangerous to let the federal government tax both sales and income. Now, he advocates both a sales tax and a separate, secret VAT, on top of a flat federal income tax. It’s almost as though the man has no idea what he’s talking about and is making things up as he goes along.

*Incidentally, this bit of popular mythology is false. Canada, for example, adopted a 7 percent VAT in 1991 as part of a deficit reduction plan. The rate has since been cut twice and now stands at 5 percent. The upward trend applies in Europe, where VATs came into being around the same time as the largest expansions of the welfare state, but it is not an ironclad rule.

Josh Barro — Mr. Barro is the Walter B. Wriston fellow at the Manhattan Institute. His research is focused on state and local fiscal policy.