Focus on Value-Added Tax

Focus on Value-Added Tax

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The Institute for Fiscal Studies in London has posted online a very extensive discussion of the VAT in the U.K. that will be published in book form in November.

On October 14, the National Retail Federation released a study done by Ernst & Young which found, not surprisingly, that a VAT would reduce consumption.

Also on October 14, Indiana Gov. Mitch Daniels, expected to be a candidate for the 2012 Republican presidential nomination, gave a speech to the right-wing Hudson Institute in which he endorsed a VAT as part of tax reform. He was savagely attacked for heresy by Dan Mitchell of the Cato Institute and Grover Norquist of Americans for Tax Reform, two very influential figures in terms of Republican tax policy.

On September 21, University of Cincinnati law professor Paul Caron posted a number of links to recent conference papers on the VAT.

On September 6, the Institute for the Study of Labor released a paper containing the results of an experiment that compared worker responses to an income tax and an equivalent consumption tax. It found that workers reduced their labor supply far more in response to an income tax.

On August 30, the National Association of Business Economics released a survey of its members in which they were asked to rank their preferences for deficit reduction. A VAT was the top choice of the largest percentage of economists from among the options presented.

Also on August 30, Walter Hellerstein of the University of Georgia law school and  Harley Duncan of KPMG published an article on VAT exemptions. While decrying such exemptions as adding to complexity and inefficiency, they concede that they are not going away.

On August 28, former Congressional Budget Office director Douglas Holtz-Eakin published a commentary arguing against adoption of a VAT, citing a study  from the American Action Forum, a Republican group, arguing that there is a strong positive relationship between a VAT and the size of government.

On August 26, the National Retail Federation released the results of a survey showing, unsurprisingly, that most people would reduce their consumption if a national consumption tax is enacted.

On August 4, Susan Morse of the Hastings Law School posted a paper on Australia’s adoption of a VAT.

I previously posted items on this topic on July 13.

Bruce Bartlett is an American historian and columnist who focuses on the intersection between politics and economics. He blogs daily and writes a weekly column at The Fiscal Times. Read his most recent column here. Bartlett has written for Forbes Magazine and Creators Syndicate, and his work is informed by many years in government, including as a senior policy analyst in the Reagan White House. He is the author of seven books including the New York Times best-seller, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006).

Bruce Bartlett’s columns focus on the intersection of politics and economics. The author of seven books, he worked in government for many years and was senior policy analyst in the Reagan White House.