If it’s a tax, you can expect the editors of the Wall Street Journal to be against it. In their recent editorial the target of their ire is the value-added tax or VAT:
The VAT is a sort of turbo-charged national sales tax on goods and services that is applied at each stage of production, not merely on retail transactions. Politicians love it because it is the most efficient revenue-raiser known to man, and its rates can be raised gradually to finance new entitlements or fill budget holes. The VAT is typically introduced with a low rate but then moves up over time until it swallows huge chunks of national economies.
The reasons stated for opposing a VAT include a) their rates inevitably increase and b) politicians can’t resist awarding lower rates to sectors they want to favor. Both of those are true of all taxes not just VAT.
If you believe that government expenditures must be kept more or less in line with government revenues and you can find no way to place a limit on the things you want the government to do, you will always want higher taxes. It’s as simple as that and it pertains to defense spending as much as it does to spending on healthcare.
I’ll just point out that the economically optimal tax in the United States today would be to eliminate all income taxes and payroll taxes in favor of a progressive consumption tax. The basic principle is that if you tax something, there will be less of it. Do we really need less income and fewer jobs?
The advantage of a VAT for me is that I could earn big bucks in the USSA, untaxed, and spend the money overseas in some place with no VAT or a low VAT.
My understanding is that VATs are particularly easy to raise because unlike income, sales, and property, we usually don’t see listed amounts, have to calculate it at the counter, or cut a check. You can raise it and it looks like prices are just going up (Vox can write an explainer detailing that all of the price increases have nothing to do with the increase in the VAT and it’s just retailers using it for cover, look at these charts).
That doesn’t make me opposed to it, but it is an argument against.
Most places I have ever been that have a VAT include the tax in advertised prices.
Really? Okay. For some reason I thought what differentiated the VAT from the regular sales tax was baked in to the sales chain, collecting just a bit at each stop on the production process. I confess my knowledge on the matter is not all it could be.
Each stop in the production process, or each sale along the process?
A square-footage tax on housing coupled with a progressive consumption tax is, I think, a good way to go in balancing out revenue goals with desirable social outcomes.
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VAT is levied on each increase of the good or service’s current value in the chain of production and distribution. The more capital, resources and labor go into it the higher the tax. If you sold a gold watch the taxable amount is the difference between your sale price and the item’s net cost after tax deductions.