A VAT Means Tax Day Is Every Day.

Caroline Baum of Bloomberg has a good column against the value-added tax, in part because she quotes me, but more so because she effectively explains that a national sales tax like the VAT would be an add-on tax that would finance much bigger government:

As Americans awake to the 2009 tax-filing deadline today, they can look forward to working longer and harder for the government in the future -- at least the dwindling share that pays individual income taxes. Enter the VAT, or value-added tax, a whole new source of revenue for the government. The VAT, a fixture in Europe for decades, is a broad-based consumption tax levied at each stage of production on the “value added,” as the name implies. Because government starts with a wish-list of new spending and entitlements and works backward to find a way to pay for them (when it’s trying to look responsible), raising more revenue without sinking the economy is an issue right now. “There is no way to finance all this new spending without an additional broad-based tax,” says Dan Mitchell, senior fellow at the Libertarian Cato Institute in Washington. Which is exactly why a VAT should be avoided, he says. “It’s akin to giving the keys to the liquor store to a bunch of alcoholics.” ...Somehow I doubt the Obama administration or Congress would propose substituting a VAT for the income tax or lowering individual or corporate tax rates as an offset. The VAT would be an add-on. ...Before you conclude that a VAT is the answer to all our fiscal problems, consider some facts. “Greece collapsed in spite of a 19 percent VAT adopted in 2005,” says Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University in Arlington, Virginia. The additional revenue from the VAT did nothing to address Greece’s indebtedness. Does anyone think an out-of-control U.S. Congress would devote increased tax revenue to deficit reduction? (If you raised your hand, go back and reread this column from the beginning.)

P.S. Apologies for being out of touch. My laptop has crashed due to some form of virus attack. I am finally able to post again thanks to the kind people at the Montreal Economic Institute.