Mitch Daniels: Hey, how about a VAT?

posted at 5:32 pm on October 15, 2010 by Allahpundit

First the infamous proposed “truce” on social issues, now this. No wonder he’s David Brooks’s candidate of choice.

Alternate headline: “Mitch Daniels continues quixotic bid to disqualify himself from Republican nomination.”

Daniels recited from Kahn’s book: “It would be most useful to redesign the tax system to discourage consumption and encourage savings and investment. One obvious possibility is a value added tax and flat income tax, with the only exception being a lower standard deduction.”

“That might suit our current situation pretty well,” said Daniels, who served as George W. Bush’s Office of Management and Budget director and was a senior adviser in Ronald Reagan’s White House. “It also might fit Bill Simon’s line in the late ‘70s that the nation should have a tax system that looks like someone designed it on purpose.”…

In a brief interview after his speech, Daniels downplayed the significance of his comments. He stressed that he would support a VAT “under only the right circumstances,” reiterating his desire for it to be paired with a flat income tax.

“If you think that the paramount problem for the country is the debt, and we’ll never get on top of it without really robust growth, one of the things you want is a very different, more pro-growth tax system,” Daniels told POLITICO. “And a quarter century ago, (Kahn) was writing about one. That’s all. There are other ways to get at it.”

He also sounded warm to the idea of a tax on imported oil. Let me play devil’s advocate here, knowing full well that tax nerds will jump down my throat in the comments: While Daniels has said before that we might need to raise taxes to eliminate the debt, the “VAT + flat tax” system would be geared mainly towards greater efficiency, not necessarily towards a heavier overall tax burden, right? The reason the VAT makes righties shudder is that it’s typically mentioned by Democrats as a new tax on top of the 25+% income tax brackets that most people currently find themselves in. All Daniels is suggesting, I take it, is replacing the brackets with a single income tax rate of, say, 15% and then dropping, say, a 10% VAT on goods and services, which would in theory make tax collection vastly more efficient while giving taxpayers an extra measure of control in deciding how much tax they pay. Want to reduce your debt to Uncle Sam this year? Simple — under a VAT, you’d just spend less.

George Will wrote about this a few months ago, conceding that there’s a case to be made for a VAT — if the federal income tax is eliminated. But what if it’s just reduced? And what about this?

A VAT is collected on value added at stages during the process of production, but most of its burden is borne by consumers. They file no VAT returns, so its stealthiness delights the political class, which can increase it in small, barely noticed increments, with every percentage point yielding another $100 billion…

Because a VAT potentially taxes everything, it would be riddled with exemptions. This is because it maximizes the political class’s opportunities for showing favoritism — by, for example, exempting certain “green” goods. It also widens that class’s scope for the pleasure of being bossy. For example, it could reduce a VAT’s regressiveness — like rain, a VAT falls equally on the rich and the poor, but the poor devote a larger portion of their income to consumption — by exempting most foods but not those that the nanny state disapproves: “Put down that sugary soda and step away from the vending machine!”

Using the VAT to target sugary drinks? Surely our government would never do that. Exit question: Is this actually clever “strategery” on Daniels’s part, as his old boss once famously said? Everyone in the GOP field is trying to throw the hardest “true conservative” fastball to impress the base and yet here he is snapping off curves and sliders to appeal to the rest. Hmmmm.


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Want to reduce your debt to Uncle Sam this year? Simple — under a VAT, you’d just spend less.

Um, no. As much of my spending as possible is done in the underground economy. A VAT would make it grow robustly.

single stack on October 15, 2010 at 8:13 PM

You know what? I’m SICK of explaining this, a hundred times over.

If you’re “not sure” about a VAT tax, then shut up. Or educate yourself, I don’t care which.

And if you WANT a VAT tax, then go to ******* Europe, where you can have a VAT tax.

Nobody sane wants that. Hell, the only reason even the BUREAUCRATS want it is to allow more micromanaging of commerce through tax breaks/penalties.

Merovign on October 15, 2010 at 8:21 PM

Anyone else see the Glen Beck episode several weeks back where they discussed Calvin Coolidge? It was great, and Amity Shlaes is working on a new book re: Silent Cal. I definitely had the sense that Glen and Amity were leading us down the road that what we need in 2012, is a New Silent Cal. For a while, I thought Mitch might be that guy. That just changed.
He will have to do some profound back-pedalling to be in the running now.

humdinger on October 15, 2010 at 9:10 PM

VAT will kill what is left of our economy faster than anything else this admin is doing………

11 years in Europe taught me that………..

RealMc on October 15, 2010 at 9:13 PM

And if you WANT a VAT tax, then go to ******* Europe, where you can have a VAT tax.

Nobody sane wants that. Hell, the only reason even the BUREAUCRATS want it is to allow more micromanaging of commerce through tax breaks/penalties.

Merovign on October 15, 2010 at 8:21 PM

Correct.

A VAT by itself is slightly better than what we have now. Better in that companies like GE won’t need 10,000 lawyers to turn in a 45,000 page tax return.

But that’s the only benefit. It can still be gamed by lobbyists and politicians trying to make life easier for their pet projects and harder for everyone else.

It’s completely the obvious of transparent, just like what we have now.

A VAT + an income tax, any income tax, is only about 100 times worse than what we have now. Do that and watch the greedy palms of Washington go crazy.

America does need to simplify the tax code. And the best way to do that is to eliminate the income tax and replace it with something else.

What else is a matter for debate.

What isn’t a matter for debate is combining the income tax with something else. That will undo every single thing the Tea Party is trying to do.

Chris of Rights on October 15, 2010 at 9:26 PM

How about you just blew it Mitch.

AshleyTKing on October 15, 2010 at 9:45 PM

tree hugging sister on October 15, 2010 at 7:29 PM

Investors Business Daily ripped you off.

Skandia Recluse on October 15, 2010 at 9:51 PM

Mitch is dead to me! VATs are bad news, plain and simple! They are a hidden tax. With VATs, it is virtually impossible to pick up an item at your local Target store and determine how much tax you would be paying on that item.

It is perfect tax for the politicians, b/c the tax can be raised slowly and the citizens wouldn’t be able to tell if the item is more expensive or the tax has increased. Thus, no one would blame the politician.

The left loves VATs because if you want less of something tax it, and they want Americans to consume less.

A simplistic view how a VAT is assessed: The more a product is processed the more it is taxed, as an additional tax is added to the item at each stage of manufacturing, processing, transporting and sales. The more complex a product, the more it can be taxed as it has to absorb the VAT from the many components that make up the product. Image trying to calculate the VAT on a personal computer…..

If someone wants to go the way of a VAT, the much more visible and fair way to go would be with a flat national sales tax. VATs are just bad news!

JeffVader on October 15, 2010 at 10:05 PM

PRESIDENT MITCH DANIELS (Bush Family 4th Term)……..

….NEVER NEVER NEVER NEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVERNEVER NEVER NEVER……but hey that’s just me.

PappyD61 on October 15, 2010 at 11:34 PM

All Daniels is suggesting, I take it, is replacing the brackets with a single income tax rate of, say, 15% and then dropping, say, a 10% VAT on goods and services, which would in theory make tax collection vastly more efficient while giving taxpayers an extra measure of control in deciding how much tax they pay.

Which would be easier: trying to institute an entirely new level of taxation,

OR

simply increasing two existing tax types?

Lowering the income tax and instituting a VAT would be much worse than just income tax in my humble opinion.

Goldenavatar on October 15, 2010 at 11:56 PM

Republicans have conned us for decades pledging conservative spending and lower taxes only to continually ratchet up spending and corruption. If this loser grasped the true concerns of the people he wouldn’t play this card. Ergo, he’s either out of touch or a fool. Neither assessment recommends him for national office.

rcl on October 16, 2010 at 1:45 AM

under a VAT, you’d just spend less.

And so would everyone else. Again, putting a barrier fence between FREE trade so the Goverment can control and regulate all commerce. The VAT Tax is evil because it hides the true value of the tax burden. No one knows the final cost in taxes of the final product therefore eliminating Transparency.

Again, it’s simply an attempt at nanny control for our own good. Flat end use SALES taxes are better. Not HIDDEN Taxes.

Egfrow on October 16, 2010 at 5:53 AM

VATs are complicated to administer because you need remittances from each sale all the way from raw materials to the consumer (although this makes tax evasion a lot harder).

Instead of a VAT, state sales taxes should be extended to cover goods and services. As it stands, goods are taxed by a general sales tax but services aren’t.

needtoknow on October 16, 2010 at 6:39 AM

America does need to simplify the tax code. And the best way to do that is to eliminate the income tax and replace it with something else.

A flat tax would be the answer IF THE ONLY GOAL WERE RAISE REVENUE. It isn’t. The tax code is more concerned with allowing The Ruling Class a tool with which to reward their friends and attack their enemies.

oldleprechaun on October 16, 2010 at 7:33 AM

Another fool working on the wrong side of the equation. IT’S THE SPENDING, STUPID!

2ipa on October 16, 2010 at 10:06 AM

The reason the VAT makes righties shudder is that it’s typically mentioned by Democrats as a new tax on top of the 25+% income tax brackets that most people currently find themselves in

Gosh… if ONLY there was some example of VAT being levied on a poor benighted population which we could show?

Hold the FRIGGIN’ horses. There is.

The United Kingdom … VAT is 17.5% on ALL goods and services and products.

And of course there is a low income tax … OOOOPS, no there isn’t!!!

There are MASSIVE income taxes, property taxes, road taxes, car taxes as well as VAT.

Jack Bauer on October 16, 2010 at 11:00 AM

A VAT by itself is slightly better than what we have now. Better in that companies like GE won’t need 10,000 lawyers to turn in a 45,000 page tax return.

Chris of Rights on October 15, 2010 at 9:26 PM

The problem is that, inevitably, the bureaucrats and politicians and the corporate and union and every other lobbyist will get their pet projects in the grind, and we end up with a system even MORE complex than we have now – even if you manage to restrict it all into a VAT context, which you can’t.

The difference is, you can hide some of your pandering and control-freak policies from most of the voters, and you get to change the rules all the time and most people only see prices going up.

Even if you have only a VAT tax, it is, if anything, MORE subject to abuse than an income tax or conventional sales tax.

Merovign on October 16, 2010 at 8:11 PM

No on VAT. It appears more efficient, but it continues to give government more control, in that it can be adjusted, waived, regulated, and otherwise applied in such a way as to punish those whom the government wants punished, while freeing up those the government wants to reward.

~ 8% flat personal income tax (with an un-taxed floor at the CBO’s annually revised poverty line) with NO EXEMPTIONS.

~ 12% flat retail sales tax on all products sold to consumers

~ Eliminate all corporate taxes, allowing businesses to lower prices and stimulate consumer spending

~ Remove all capital gains taxes, stimulating investment

Watch the budget balance in three years.

Freelancer on October 17, 2010 at 10:15 AM

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