Ph.D. Octopus

Politics, media, music, capitalism, scholarship, and ephemera since 2010

Bring on the VAT

with one comment

Charles Krauthammer warns Americans to beware of the VAT, or value-added tax. It’s coming to raise more revenue to support Obamacare. It’s a sales tax that Krauthammer calls “the ultimate cash cow.”He also notes:

By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent.

Krauthammer worries that Obama “will have succeeded in reversing Reaganism” (If only that were true). He thinks a VAT is okay, as long as income tax is reduced or eliminated.

As a substitute for the income tax, the VAT would be a splendid idea. Taxing consumption makes infinitely more sense than taxing work. But to feed the liberal social-democratic project, the VAT must be added on top of the income tax.

I think this would be a good thing. Krauthammer thinks even the VAT won’t be adequate, and ultimately Obamacare will lead to “health care rationing.” That Orwellian term is complete garbage: many countries that have both a VAT and a progressive income tax have better, more egalitarian health care system with better health outcomes for the populace. Yes, the VAT is regressive. but as I’ve mentioned before, a VAT, along with a progressive income tax, can go a long way to funding a universal health care program and the welfare state more broadly.


Written by David Weinfeld

March 28, 2010 at 23:16

Posted in economics, Health Care

One Response

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  1. I don’t know a ton about it, but couldn’t a good chunk of the VAT’s regressiveness be eliminated if you simply exempted a handful of non-luxury necessities (food, diapers, etc…)?
    Seems like a consumption tax could be engineered in a smart way to fall heavily on items that mostly are either luxuries (Yachts, second homes, little annoying dogs, etc…) or items that we have some good reason to want people to avoid (soda, gasoline, cigarettes etc…).


    March 29, 2010 at 22:34

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