Governor Mitch Daniels of Indiana has triggered a spat among policy wonks with his recent comments expressing sympathy for a value-added tax (VAT). Kevin Williamson of National Review is arguing that a VAT will probably be necessary because there is no hope of restraining spending. Ryan Ellis of Americans for Tax Reform jumped on Williamson for his “apostasy,” arguing that a VAT would be bad news for taxpayers. From a policy perspective, I’m very much against a VAT because it will finance bigger government, as explained in this video.
That being said, Kevin Williamson makes a good point when he says that some supply-siders have neglected the spending side of the fiscal ledger. And it certainly is true that Republicans don’t seem very interested in curtailing the growth of government. But does this mean, as Williamson argues, but that our choices are limited to 1) a 36 percent spending cut, 2) catastrophic deficits and debt, or 3) a European-style value-added tax.
I actually think it would be a great idea to reduce the budget by 36 percent. That would bring the burden of federal spending back down to where it was in 2003. Notwithstanding the screams from various interest groups that this would generate, nobody was starving in the streets when the budget was $2.3 trillion rather than today’s $3.5 trillion. But Kevin is unfortunately correct in noting that this type of fiscal reform won’t happen.
Kevin is wrong, however, in saying that we therefore have to choose between either Greek-style deficits or a VAT. According to the Congressional Budget Office, tax revenues over the next 10 years will increase by an average of about 7.3 percent each year – and that’s assuming the tax cuts are made permanent and the AMT is adjusted for inflation. Reducing red ink simply requires that politicians exercise a tiny bit of restraint so that spending grows by a lesser amount. This video walks through the numbers and shows how quickly the budget could be balanced with varying levels of spending discipline.
By the way, it’s worth pointing out that the VAT has not prevented gigantic deficits in nations such as Greece, Japan, Ireland, Spain, England, etc, etc. Politicians in those nations implemented VATs, usually with promises that the money would be used to reduce other taxes and/or lower red ink, but all that happened was more spending and bigger government (this cartoon makes the point in a rather amusing fashion). In other words, Milton Friedman was right when he wrote that, “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”
[…] I’ve quoted him many times (here, here, here, here, here, and here) to help explain why higher taxes simply lead to more government spending rather […]
[…] gone after Kevin Williamson, Josh Barro, and Andrew Stuttaford for the same […]
[…] gone after Kevin Williamson, Josh Barro, and Andrew Stuttaford for the same […]
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[…] to find support for a VAT from people such as Tom Dolan, Greg Mankiw, and Paul Ryan, as well as Kevin Williamson, Josh Barro, and Andrew Stuttaford. And I wrote that Mitch Daniels, Herman Cain, and Mitt […]
[…] I’ve quoted him many times (here, here, here, here, here, and here) to help explain why higher taxes simply lead to more government spending rather […]
[…] I’ve quoted him many times (here, here, here, here, here, and here) to help explain why higher taxes simply lead to more government spending rather […]
[…] I’ve quoted him many times (here, here, here, here, here, and here) to help explain why higher taxes simply lead to more government spending rather […]
[…] Dolan, Greg Mankiw, and Paul Ryan have all expressed pro-VAT sympathies. The same is true of Kevin Williamson, Josh Barro, and Andrew […]
[…] I’ve quoted him many times (here, here, here, here, here, and here) to help explain why higher taxes simply lead to more government spending rather […]
[…] I’ve quoted him many times (here, here, here, here, here, and here) to help explain why higher taxes simply lead to more government spending rather […]
[…] I’ve quoted him many times (here, here, here, here, here, and here) to help explain why higher taxes simply lead to more government spending rather […]
[…] Mankiw, and Paul Ryan. I’ve previously expressed discomfort about the pro-VAT sympathies of Kevin Williamson, Josh Barro, and Andrew […]
[…] Mankiw, and Paul Ryan. I’ve previously expressed discomfort about the pro-VAT sympathies of Kevin Williamson, Josh Barro, and Andrew […]
[…] Mankiw, and Paul Ryan. I’ve previously expressed discomfort about the pro-VAT sympathies of Kevin Williamson, Josh Barro, and Andrew […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
[…] Since most of the previous observation are critical, I want to stress that I’m not being partisan. I also was disappointed in the Republican response. Was the GOP smart to showcase a governor who was part of the big-spending Bush Administration? Especially one who has said nice things about the value-added tax? […]
[…] Since most of the previous observation are critical, I want to stress that I’m not being partisan. I also was disappointed in the Republican response. Was the GOP smart to showcase a governor who was part of the big-spending Bush Administration? Especially one who has said nice things about the value-added tax? […]
[…] Since most of the previous observation are critical, I want to stress that I’m not being partisan. I also was disappointed in the Republican response. Was the GOP smart to showcase a governor who was part of the big-spending Bush Administration? Especially one who has said nice things about the value-added tax? […]
[…] Since most of the previous observation are critical, I want to stress that I’m not being partisan. I also was disappointed in the Republican response. Was the GOP smart to showcase a governor who was part of the big-spending Bush Administration? Especially one who has said nice things about the value-added tax? […]
[…] Kevin Williamson of National Review is always worth reading, whether he’s kicking Paul Krugman’s behind in a discussion about the Texas economy, explaining supply-side economics, or even when he’s writing misguided things about taxation. […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
[…] giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a […]
No, I have not argued that we need a VAT. I do not believe that we need a VAT, and I do not support the imposition of a VAT. I have argued that we probably will face some tax increases, because it is unlikely that Republicans will balance the budget through spending cuts alone.
You have mischaracterized my position and should correct yourself.
Best,
Kevin