I’m about a week late to this debate, but I wanted to weigh in on the irony of Sens. Ted Cruz and Rand Paul proposing a value-added tax (VAT).
It’s ironic for a few reasons. First, their idea of a VAT is being praised by columnists in places like the Washington Post for its efficiency in raising revenue. Second, the VAT is specifically a European-style tax that was invented by the French. (Let’s just call them “Freedom Taxes” and see if anyone notices.)
Third, in world where we hear a lot about politicians wanting to “simplify” our taxes, the VAT is fairly complex — and hidden). This flies in the face of conservative orthodoxy. As Ramesh Ponnuru noted at Bloomberg, “Ronald Reagan went so far as to say that he thinks ‘taxes should hurt.'” But Cruz and Paul are “lending credence to the old worry that tax burdens can indeed be hidden.”
And lastly, although Cruz and Paul are the two candidates most interested in playing in the “libertarian” lane, libertarians seem to be especially skeptical of the idea. What is more, these criticisms of a VAT have been around forever.
As Murray Rothbard wrote way back in 1972,
The VAT is essentially a national sales tax, levied in proportion to the goods and services produced and sold. But its delightful concealment comes from the fact that the VAT is levied at each step of the way in the production process: on farmer, manufacturer, jobber and wholesaler, and only slightly on the retailer.
Now some conservative economists, like Stephen Moore, defend the Cruz and Paul plans on the grounds that while instituting a VAT, their flat-tax plans also “ELIMINATE the payroll tax and corporate taxes.” [His caps.] But the idea that government would 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 to replace the property tax for its prime task of financing local public schools. Any relief of the onerous burden of the property tax sounds good to many Americans.
But anyone familiar with the history of government or taxation should know the trap in this sort of promise. For we should all know by now that taxes never go down. Government, in its insatiable quest for new funds, never relaxes its grip on any source of revenue.
Of all the candidates who might have proposed such a thing, I’m actually stunned that these were the two. If nothing else, this is yet another sign of how things that once would have been viewed as conservative apostasy (see Donald Trump’s entire campaign!) are now either greeted with a yawn — or celebrated.