Tuesday, May 10, 2005

Tax Policy

Bruce Bartlett writes an interesting article on his tax policy. He attacks the idea of a national sales tax, although not on the grounds that it would massively screw the poor and the middle class while giving the wealthy a slap on the wrist. Instead he says it is impractical, akin to just running the government on donations.

He then notes President Bush's budgetary policy (with lots of help from the Republican Controlled congress) will require a tax hike at some point.
Too many conservatives delude themselves that all we have to do is cut foreign aid and pork barrel spending, and the budget will be balanced. But unless they are willing to seriously confront Medicare, they cannot do more than nibble around the edges. With Republicans having recently added massively to that problem and a Republican president who won't veto anything, I have concluded that meaningfully controlling spending is hopeless.

Therefore, we must face the reality that taxes are going to rise a lot in coming years. I believe that a VAT is the least bad way of getting the hundreds of billions of dollars per year that will be needed.
He's not wrong. Well except about the VAT. I don't know so much about that.

A VAT, for those interested, is defined as follows.
levy imposed on business at all levels of the manufacture and production of a good or service and based on the increase in price, or value, provided by each level. Because the consumer ultimately pays a higher price for the taxed commodity, a VAT is essentially a hidden sales tax.
Well not sure if that is a great idea, but I'm not a fan of regressive taxes. Even if they are hidden.

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