More on America and the VAT

October 1, 2009

The oh-so-smart Andrew Samwick on the chances of a VAT over at the Capital Gains and Games blog:

James Pethokoukis is on the case, putting together the pieces of a “yes.”  My prediction: regardless of how urgent the need for revenue may be, taxes on the highest earners would have to go up dramatically before a VAT of any size would be passed.  Failing that, the Left’s history of the first two decades of the 21st century would be that taxes on the wealthy were lowered and 2001 and 2003 and then raised on the middle class in 201x.  The Left is already smarting from what it perceives (correctly, I might add) as a similar thing that happened in the 1980s, when income tax rates were lowered while payroll taxes were increased.  They won’t go in for this again unless a very large income tax increase on the highest earners is part of the bargain.

Me: This is another example of why I feel we need major tax reform rather than trying to glom something else onto the current system. But the politics are amazingly tricky, which is another reason why I don’t see why cutting spending is necessarily more difficult than raising taxes, politically speaking.

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