I’m about a week late to this debate, but I wanted toweigh in on the irony of Sens. Ted Cruz and Rand Paul proposing avalue-added tax (VAT).
It’sÂ ironic for a few reasons. First, theiridea of a VAT isÂ being praised by columnists in places like theWashington PostÂ for its efficiency inraising revenue. Second, the VAT is specifically a European-style taxÂ thatwasÂ invented by theFrench.Â (Let’s just call them “FreedomTaxes” and see if anyone notices.)
Third, inÂ world where we hear a lot aboutpoliticians wanting to “simplify”ourÂ taxes, the VATÂ isfairlyÂ complex — and hidden). This flies in theface of conservative orthodoxy. As Ramesh Ponnuru notedÂ atBloomberg, “Ronald Reagan went so farasÂ tosayÂ that he thinks ‘taxes shouldhurt.'” But Cruz and Paul are “lending credence to theold worry that tax burdens can indeed be hidden.”
And lastly, although Cruz and Paul are the two candidates mostinterested in playing in the “libertarian” lane,libertarians seem to be especially skeptical of theidea.Â What is more, theseÂ criticisms ofa VAT have been around forever.
AsÂ Murray Rothbard wroteÂ way back in1972,
The VAT is essentially a national sales tax, levied inproportion to the goods and services produced and sold. But itsdelightful concealment comes from the fact that the VAT is leviedat each step of the way in the production process: on farmer,manufacturer, jobber and wholesaler, and only slightly on theretailer.
Now some conservative economists, like Stephen Moore, defend the Cruz and Paul plans on the groundsthatÂ while instituting a VAT, their flat-tax plansalsoÂ “ELIMINATE the payroll tax and corporatetaxes.” [His caps.]Â But the idea that governmentwould fully eliminate a current stream of revenue seems dubious.More likely, we will simply add a VAT.
Again, this isn’t an original idea. As Rothbard wrote,
One of the selling points for VAT is that it is supposed only toreplace the property tax for its prime task of financinglocal public schools. Any relief of the onerous burden of theproperty tax sounds good to many Americans.
But anyone familiar with the history of government or taxationshould know the trap in this sort of promise. For we should allknow by now that taxes never go down. Government, in itsinsatiable quest for new funds, never relaxes its grip on anysource of revenue.
Of all the candidates who might have proposed such a thing,I’m actually stunned that these were the two. If nothingelse, this is yet another sign of how things that once would havebeen viewed as conservative apostasy (see Donald Trump’sentire campaign!) are now either greeted with a yawn — orcelebrated.