Wednesday, November 17, 2010

What’s wrong with a VAT?

Even good liberals like Alice Rivlin are now on board with a VAT (reference).  It’s the stylish thing to do.  It’s clean, it taxes Consumption, and leaves all that money not spent free for Investment….  It’s regressive, but we can overlook that, can’t we, like we’ve been doing with all other major tax changes for the past 30 years?

But—Investment where?  Unless the government wants to also get into the dicey game of capital controls—which would almost certainly plunge the world into the Greatest Depression post haste—the money will likely flow overseas, to economies where growth is high and returns are saucy.

And the dying middle class gets one last wallop before going extinct, transmogrifying into a serf class.  The rich are laughing all the way to the bank….

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