For years Dan Mitchell has criticized the value added tax (VAT). There are major problems with the way European nations have implemented the VAT. The biggest is that they didn’t get rid of all their other taxes first. At his blog International Liberty, Mitchell, a senior fellow at the Cato Institute, explains under what conditions a VAT might actually be favorable. He writes:
Whenever I see an otherwise sensible person express support for a value-added tax, it triggers a Pavlovian response. And it’s not a favorable reaction.
- I’ve criticized Tom Dolan, Greg Mankiw, and Paul Ryan, for pro-VAT comments.
- I’ve gone after Kevin Williamson, Josh Barro, and Andrew Stuttaford for the same reason.
- I wrote that Mitch Daniels, Herman Cain, and Mitt Romney deserved skepticism from voters for being sympathetic to a VAT.
- I also dinged Rand Paul and Ted Cruz for including value-added taxes in their campaign tax plans.
- I strongly disagreed with pro-VAT articles by Peter Morici, Jim Carter, Geoff Davis, and Alan Murray.
But I just read a pro-VAT column and I liked it.
So what happened? Have I surrendered to big government? Did I ingest some magic mushrooms?
Actually, I think you’ll agree that I’m still the same lovable guy. Yes, Professor John Cochrane of the University of Chicago (also a Cato adjunct scholar) has a column in the Wall Street Journal that embraces a VAT. But unlike all of the others I just cited, he includes a condition that is mandatory, necessary, vital, and non-negotiable. It’s so important that it deserves the opposite of fine-print treatment.
…eliminate entirely the personal and corporate income tax, estate tax and all other federal taxes. …it is essential that the VAT replace rather than add to the current tax system, as it does in Europe.
Amen. John hits the nail on the head.
Read more from Dan here.