Don’t Look VAT

Allow me to object to the DrumKleinYglesias consensus for a VAT to fund universal health care. The efficiency arguments for it are convincing, but I don’t think that’s enough to make up for its regressiveness and its stealth. Sure, as Matt says, “a universal health care program would be a highly progressive measure, so progressivity would continue to exist even given a somewhat regressive finance structure,” but that doesn’t mean that it would be still better to fund a progressive entitlement with progressive taxation. Sure, this is better than using a VAT to fund, say, union-busting, but it’s not as good as doing, say, what the Australians do: use an income tax surcharge which exempts low-income taxpayers.
Also, the VAT is problematic for reasons of democratic accountability. Allow McMegan to explain:

Just say no to the Value Added Tax. In theory, it’s a good tax. In practice, because it is extremely hard to tell what proportion of the price of anything represents the tax, it removes the good and natural pressure upon tax rates.

Look, I find the idea of a tax so easy to expand as to make funding new entitlements a piece of cake as attractive as the next person. But people have a right to know what they’re paying in taxes, and the VAT prevents that from happening.
Of course, I think we can all agree that funding the entire federal government using integrals would be the best solution. That way, my long hours doing anti-differentiation in calculus class last year wouldn’t be for naught.

1 thought on “Don’t Look VAT

  1. I don’t have any strong opinion about the VAT, but I think that these particular objections are problematic. First, there is a simple way to make sales taxes progressive: Lower or eliminate sales taxes on necessities. If you exempted food and a few other things, then a VAT could be adequately progressive. Second, I think that you are overreacting to the “stealth” argument. Taxes are already far too complicated for people to see the big picture, to the point that “hiding” taxes is a small issue. For instance, American gasoline taxes are not VATs, but they are also aren’t listed separately. But the voters know what is going on. In other respects, a VAT is actually much simpler than, for instance, income taxes.
    You are also certainly mixing oil and water in calling calculus the epitome of complications. Calculus is an abstract topic; it doesn’t have to be complicated. On the contrary, the whole point of calculus is to use abstractions to simplify calculations that would otherwise be hopelessly complicated. Without calculus, you would have to resort to the same method for calculations in general as people use for taxes: Dividing things into brackets. So for instance, without calculus, you could only estimate the total surface area of the Earth by adding up the areas of many small pieces. With calculus, you can know that the surface area is almost exactly the Earth’s diameter times its circumference. (Okay, Archimedes knew that too, but that was because he presaged calculus.)
    I’m sure that calculus is too abstract for individual taxpayers, probably too abstract for elected politicians too. Of course, if you do add abstractions that people can’t handle, it opens the door to complications as well. Even so, it’s a shame when people accept crude complications as a refuge from even a small amount of abstraction. The tax code is an 80-piece jug band that is much worse than one good violinist would have been. Or even one good guitarist. And the grief begins well before fear of calculus. The tax code is already mangled by fear of fractions. But since no one ever fears tax deferments, that turns out to be a major source of true complications.
    Actually, even calculus, as an instructional standard, has suffered the same way as the tax code. For both good and bad reasons, calculus has become the main litmus test of college mathematical preparation. So it has become violin lessons that are widely taught to people who may or may not be prepared to learn the violin. In good classes most of the students are ready for guitar, so a lot of the time they (who write the calculus book and the syllabus) sometimes add a fret to the violin, and sometimes ask you to pluck the strings instead of bowing them. Occasionally you actually play it like the violin. But in bad calculus classes, the students are hardly ready for the guitar either, so then they divide the violin into four “violins” with one string each. To give the course some body, they also add some harmonicas and drums, and now (in the age of computerized instruction) some karaoke for the one-string plucked violin. So that calculus, the course, sounds less and less like the violin and more like a jug band.
    I freely admit that beautiful calculus, like the violin, is a difficult instrument and not for everyone. But it would be good if people generally learned that abstraction is not the same as complication. A lot of people learn this instead: “Violin? Yeah, I suffered through that in AP, and again in college. It was the noisiest jug band ever.”

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