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I'm not sure. Over 166 countries have VATs (not just Europe), also more commonly known as Goods and Services Tax (GST). The U.S. is actually one of the few nota

by wenc 7y ago

I'm not sure. Over 166 countries have VATs (not just Europe), also more commonly known as Goods and Services Tax (GST). The U.S. is actually one of the few notable exceptions -- preferring state/sales taxes instead. A VAT like anything can be complicated but does not have to be -- it depends on the implementation. Many countries have figured it out without (many of) the downsides you mentioned. I'm from a country with a GST and it's mostly transparent. Criticisms of a VAT can be found here [1] and they mirror your arguments, but they also provide additional context to guide one's judgment. If read carefully, it's clear the outcomes are varied and dependent on implementation, and does not uniformly result in ill-effects as many would initially suspect. It's actually a tried and true idea -- otherwise countries would be falling over themselves trying to repeal theirs. [1] https://en.wikipedia.org/wiki/Value-added_tax#Criticisms https://en.wikipedia.org/wiki/Value-added_tax#Criticisms

wahern 7y ago
I don't doubt VAT could work, nor that it does work. But we can't compare various small countries to the entirety of the U.S. I'm sure VAT could work well in many U.S. states, too. But the better comparison is with the EU and China, where VAT imposes serious problems. Our existing system also has serious problems, but I'm skeptical that a VAT would prove anything more than a lateral move. Implementing it with the expectation of significantly increased revenue and fairness is definitely too optimistic. Most Obamacare cost mitigation reforms were taken from evidenced-based and theoretically-grounded economic policy research. While some of it has worked well, the dividends have nonetheless been notoriously underwhelming. Which isn't to say they should be rejected, just that we should moderate our expectations regarding applied economic theory. "Neoliberal" has become an epithet in this country precisely because textbook economic theory hasn't played out as well as expected here. Part of it is because the theory was too simplistic at scale, and part of it is because its application in the U.S. is difficult and often impossible--the U.S. has significant political and social problems and attitudes that impede the application of certain kinds of policies. Part of it is that it has worked well, but some policies make for an easier scapegoat than others. Obamacare is again instructive. Nobody doubts, nor is anybody even surprised, that Obamacare needs reform. It was designed with processes to systematize ongoing reform. (One aspect of which was spun as "death panels".) But because of its politicization and our extreme political polarity, constructive, incremental reform has become impossible. Instead we teeter between radical rejection and paralysis. We've become a nation obsessed with radical reform precisely because we're incapable of faithful, consistent application of social policy generally. Technology (VAT is a social technology) won't save us. Our problems are deeper.
- wenc 7y ago
  I don't doubt there's a lot of uncertainty in the exact revenue will it bring in. With exemptions and other factors such as fraud etc., the total revenue will certainly not equal a simple VAT% * economic activity -- and most level-headed people who have lived for a while would not expect that to be true. I think having moderate expectations is wise -- I don't think we disagree there. None of us (I hope) truly expects any single move to "save" us as such, merely that some moves are more reasonable and pragmatic than others. That said, I think it's a move in the right direction based on my experience with it in the countries I've lived in. It will definitely raise positive revenue (this is incontrovertible -- whether it raises enough revenue is another issue). My intuition tells me a VAT will likely not be a merely lateral move but of course I have no proof. Theoretical analyses on a complex system are often unconvincing, so I won't advance those. What I find compelling though--and I offer this not to convince you or others, but merely something I personally find reasonably persuasive--is that unlike mere economic theory, the VAT idea is actually a live experiment running in 166 countries right now, with different parameters. One may argue that none of those experiments have scales that match the gargantuan size of the U.S. economy, and that many of them are encumbered with different issues like complexity, but nonetheless many of those experiments have actually been fairly successful over a long period of time. I guess I'll make the modest suggestion that a VAT is at the very least not a crackpot idea and worth thinking about. Whether or not it will work in the U.S. isn't something we can definitively know without actually running the experiment.

by wenc 7y ago

wahern 7y ago

I don't doubt VAT could work, nor that it does work. But we can't compare various small countries to the entirety of the U.S. I'm sure VAT could work well in many U.S. states, too. But the better comparison is with the EU and China, where VAT imposes serious problems. Our existing system also has serious problems, but I'm skeptical that a VAT would prove anything more than a lateral move. Implementing it with the expectation of significantly increased revenue and fairness is definitely too optimistic. Most Obamacare cost mitigation reforms were taken from evidenced-based and theoretically-grounded economic policy research. While some of it has worked well, the dividends have nonetheless been notoriously underwhelming. Which isn't to say they should be rejected, just that we should moderate our expectations regarding applied economic theory. "Neoliberal" has become an epithet in this country precisely because textbook economic theory hasn't played out as well as expected here. Part of it is because the theory was too simplistic at scale, and part of it is because its application in the U.S. is difficult and often impossible--the U.S. has significant political and social problems and attitudes that impede the application of certain kinds of policies. Part of it is that it has worked well, but some policies make for an easier scapegoat than others. Obamacare is again instructive. Nobody doubts, nor is anybody even surprised, that Obamacare needs reform. It was designed with processes to systematize ongoing reform. (One aspect of which was spun as "death panels".) But because of its politicization and our extreme political polarity, constructive, incremental reform has become impossible. Instead we teeter between radical rejection and paralysis. We've become a nation obsessed with radical reform precisely because we're incapable of faithful, consistent application of social policy generally. Technology (VAT is a social technology) won't save us. Our problems are deeper.

wenc 7y ago
I don't doubt there's a lot of uncertainty in the exact revenue will it bring in. With exemptions and other factors such as fraud etc., the total revenue will certainly not equal a simple VAT% * economic activity -- and most level-headed people who have lived for a while would not expect that to be true. I think having moderate expectations is wise -- I don't think we disagree there. None of us (I hope) truly expects any single move to "save" us as such, merely that some moves are more reasonable and pragmatic than others. That said, I think it's a move in the right direction based on my experience with it in the countries I've lived in. It will definitely raise positive revenue (this is incontrovertible -- whether it raises enough revenue is another issue). My intuition tells me a VAT will likely not be a merely lateral move but of course I have no proof. Theoretical analyses on a complex system are often unconvincing, so I won't advance those. What I find compelling though--and I offer this not to convince you or others, but merely something I personally find reasonably persuasive--is that unlike mere economic theory, the VAT idea is actually a live experiment running in 166 countries right now, with different parameters. One may argue that none of those experiments have scales that match the gargantuan size of the U.S. economy, and that many of them are encumbered with different issues like complexity, but nonetheless many of those experiments have actually been fairly successful over a long period of time. I guess I'll make the modest suggestion that a VAT is at the very least not a crackpot idea and worth thinking about. Whether or not it will work in the U.S. isn't something we can definitively know without actually running the experiment.