Arnold Kling

Against Tax Reform

Arnold Kling, Great Questions of Economics
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The Treasury Department is mulling tax reform proposals, and this worries Bruce Bartlett

Adopting a VAT [national sales tax], however it is termed, would put the U.S. on a slippery slope toward European levels of taxation and government. The Bush administration will be making a terrible mistake if it starts down that road.

A sales tax can be made to be both efficient (less distortionary and less costly to comply with) and progressive (by exempting some basic necessities). It might be good to use such a tax to replace both the corporate income tax (which creates huge distortions and large compliance costs) and the Social Security tax (which hits the poor the hardest) with a sales tax. But Bartlett thinks that if our tax system were better, that would make it easier for government to raise taxes. So he would prefer a worse tax structure.

Discussion Question. Is the difference between the size of government ain Europe and the United States really due to the VAT?

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