Presidential candidates Ted Cruz and Rand Paul have proposed value-added taxes (VATs) as part of their tax reform plans.
I critique these taxes in National Review today, arguing that they could become engines of big government growth.
Cruz and Paul are champions of small government, and so their embrace of VATs is unfortunate, and also potentially dangerous.
Dangerous because VATs are probably the only way that liberals would be able to fund the huge projected growth in unreformed entitlement programs in coming years.
In a worse-case scenario under the current tax system, liberals would succeed in hiking income taxes, but they wouldn’t be able to seize much more money because the income tax base is so mobile in today’s global economy. The corporate income tax, for example, is a complex and damaging tax, but it is not capable of raising the government any more revenue than it already does.