Gearing Up for the VAT Fight

The GOP needs to prove they are serious about balancing our nation's books. When the fight over a value added tax arrives, deficit-minded Republicans cannot lead with false claims that deficits will be closed by further tax cuts or by focusing on waste, fraud and abuse.

Ezra Klein, always one-step ahead of the conventional wisdom, is writing that you can't close the deficits by taxing the rich. Acknowledgement by progressives that the welfare state cannot be financed on the backs of the "rich" would be a cause for celebration if not for the preferred solution. For sure, today Klein tells us that the only solution is getting healthcare costs under control.

But he is certainly wrong that "no tax regime" can keep up with the fiscal impact of demographic changes.  In this piece, through the mouth of Tyler Cowen, Klein, in fact, backs into a claim that the VAT has real revenue generating potential, and must be considered given the ultimate failure of income taxes and spending cuts to close the budget deficit.  Ezra himself has referred to the VAT, in general, as a "good idea."

As Ezra's post confirms, the VAT fight is coming.  And when it comes deficit-minded Republicans cannot lead with the false claims that deficits will be closed by further tax cuts or by focusing on waste, fraud and abuse.  They need to be serious about balancing the books.  Klein writes that Tyler Cowen asks conservatives when they will support the VAT. The answer for conservatives who want to broaden the tax base and reward saving and investment rather than consumption should be 'after we repeal the 16th Amendment.'