Strangely, though, neither of the presidential campaign’s VAT champions wants to openly call his plan a “value-added tax.”
Cruz euphemizes his as a “business flat tax”; Paul dubs his a “business-activity tax.” These rebrandings are probably intended to make their proposals sound more like business income taxes — which both candidates would entirely repeal — even though consumption taxes and business income taxes target different things.
After all, for all their pluses, VATs come with peculiar politics. Already , conservative commentators have denounced these candidates’ “hidden,” “European-style” VATs because they might make it too easy to raise revenue — and thereby increase the size of government.
This fear that VATs might work a little too well has a long history. Back in 1988, economist Lawrence Summers quipped that we don’t have a VAT because liberals think it’s regressive and conservatives think it’s a money machine. We’ll get one, he said, when they reverse their positions.