Archive for April 16th, 2010

Tax-news.com reports that the French and Italian governments want Europe to impose a tax on imports from nations that don’t adopt misguided climate-change/global-warming rules. This is awful policy, but the good news is that such a policy presumably won’t happen unless all 27 European Union nations agree:

France and Italy have demanded that the European Union (EU) consider the introduction of a carbon tax on imports from outside the EU, where countries do not comply with EU standards on environmental issues. In a joint letter to Jose Manuel Barroso, the head of the European Commission, President Sarkozy of France and Prime Minister Silvio Berlusconi of Italy stressed that: “It would be unacceptable if the ambitious efforts already agreed by the EU to reduce greenhouse gas emissions… were compromised by carbon leaking due to… insufficient action by certain third countries.” The letter went on to say that the tax could be used to pressurize third world countries to adopt measures to reduce their carbon emissions. …The irony is that the French government recently abandoned a plan to introduce a carbon tax in the country following a ruling that it was unconstitutional. The French government’s view is that any new carbon tax would only be viable if it was adopted by all 27 EU member states.

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Here’s a bit of good news. The Senate is now on record – overwhelmingly – against the value-added tax. To be sure, this doesn’t guarantee that the 85 Senators who voted the right way will continue to vote the right way if they have a real opportunity to take more money from taxpayers (after all, Obama didn’t hesitate to break his promise about no tax hikes on middle-class people), but this symbolic vote does put them on record against the VAT and it would be politically painful to reverse themselves anytime in the near future. The Washington Times reports:

Senators voted overwhelming Thursday to say they don’t want to create a new value-added tax, or VAT, in a vote designed to take the wind out of an idea that had been circulating among policymakers for the last several weeks. The 85-13 vote against a VAT was nonbinding, but it did put one chamber of Congress on record in opposition to adding the new tax just weeks before the first meeting of President Obama’s debt commission, which is supposed to report back this year on how to bring the country’s finances under control. Six senators are part of that commission, and all six voted against a VAT, a type of consumption tax that’s been adopted in Europe. …The VAT vote was spurred by recent comments by Paul Volcker, a former chairman of the Federal Reserve who is now a top economic adviser to Mr. Obama. He said imposing a VAT “was not as toxic an idea” as it once was. Mr. Volcker was answering a question from the audience at an event in New York. …Of the 13 senators who voted to support the possibility of a VAT, 12 were Democrats and one, Sen George V. Voinovich of Ohio, was a Republican.

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Writing for National Review’s Corner, Andrew Stuttaford claims that a value-added tax is a recipe for good policy because income tax rates were reduced under Thatcher and government spending (as a share of economic output) fell – good steps that were enabled, he asserts, by an increase in the VAT.

Stuttaford’s heart is in the right place, but the knock against a VAT has never been that it is impossible to have temporary periods of good policy. Instead, the problem is that an additional revenue source will enable an increase in the overall burden of government over time. And since the U.K.’s top tax rate is now up to 50 percent (a policy Cameron has no intent of reversing if he happens to win) and government spending has now skyrocketed to more than 50 percent of gross domestic product, all the fears of VAT opponents have been realized. Oh, by the way, it is a near-certainty that the VAT will climb to 20 percent regardless of who wins the election.

The VAT is terrible policy for anybody who cares about preserving liberty and restraining government. Period.

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