August 29, 2010

Tax Reform, Yes! VAT, No!

By Douglas Holtz Eakin and Cameron Smith, Politico
Saturday, August 28

The federal budget is in worse shape than Roger Clemens’s reputation.

It ran a deficit of $1.4 trillion in fiscal 2009 and is on track to nearly match this red ink in 2010. Going forward, there is no relief in sight.

This stark reality has fueled calls for a federal value-added tax.

House Speaker Nancy Pelosi (D-Calif.) has asserted that a VAT is “on the table.” The debt commission Co-chairman Erskine Bowles said, “There are many good arguments that you can make for a value-added tax.” Even conservative wunderkind Rep. Paul Ryan’s comprehensive fiscal reform “road map” contains a VAT.

Not so fast. If Congress continually resorts to tax increases, the result will be a growth-killing cycle of spend and tax. Congress should forget the VAT, control spending and get on with the task of pro-growth tax reform.

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Tax Reform, Yes! VAT, No!

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