Tags: value-added tax | U.S. deficit | Center for Strategic Tax Reform

Economist: Value-Added Tax Would Bloat Government and Stall Growth

Monday, 29 Aug 2011 09:04 AM

The head of the Center for Strategic Tax Reform and the group’s chief economist say a value-added tax (VAT) would raise revenue but bloat government.

"The VAT is believed to be a magical device that can stuff government coffers with money without untoward economic political consequences," Ernest Christian and Gary Robbins write in The Wall Street Journal. "It is no such thing."

Instead, increasing taxes will reduce economic growth and refinance government sufficiently to expand on a grand scale, say Christian and Robbins.

“We estimate that each percentage point of a U.S. VAT would provide Washington over 10 years with approximately $981 billion with which to launch new spending,” they say. “So even a small VAT might help reduce the debt-to-GDP ratio.”

However, by making reforms to entitlement spending less likely, VAT revenues would also lead to a permanent increase in spending to 24 percent or more of GDP (compared to the historic average of 20 percent).

"If the point of the current debt-ceiling exercise is to make the American people better off, the smart thing is to restore long-term fiscal integrity and economic growth with a balanced combination of spending reductions and tax cuts," Christian and Robbins say.

“If Republicans get sucker-punched by a VAT, America will forever lose the opportunity to reduce spending, cut taxes, grow the private economy, and restore the country's long-term fiscal integrity.”

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Economy
The head of the Center for Strategic Tax Reform and the group s chief economist say a value-added tax (VAT) would raise revenue but bloat government. The VAT is believed to be a magical device that can stuff government coffers with money without untoward economic...
value-added tax,U.S. deficit,Center for Strategic Tax Reform
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2011-04-29
Monday, 29 Aug 2011 09:04 AM
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