Cultural Revolutions

Stop Lying About VATs

Writing recently in Forbes, Brian Wesbury continued a theme that is popular among Beltway Republicans, warning about the dangers of a consumption tax system known as a Value-Added Tax (VAT).  Wesbury advances the specious argument that a VAT is bad because it would be placed “on top of the income tax” and “will harm the competiveness [sic] of the U.S., reduce growth and lead to even fewer jobs and higher unemployment.”

Wesbury’s premise is faulty.  He assumes that a consumption tax in the form of a VAT would be a new form of taxation, which would be added to all taxes already in existence.  But that is not an argument against a VAT; it is an argument against increasing the tax burden.  That would be the case for any proposal that would increase income taxes, payroll taxes, or corporate taxes without proposing a reduction in other taxes.  The key to achieving a business consumption tax’s objectives—getting the private sector working again, rebuilding the U.S. manufacturing base, reducing the trade deficit, and bringing jobs home to America—is to replace completely the current corporate tax system with a business consumption tax.  Obviously, the current system of business taxation isn’t working.  The United States had zero private-sector job creation in the first decade of the 21st century, under...

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