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Kuros
Joined: 27 Apr 2004
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 Posted: Fri Oct 16, 2009 9:59 pm Post subject: Paying for Healthcare: VAT |
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A Value-Added Tax Could Cover Health Care
The article outlines America's fiscal crunch, and then offers its VAT proposal.
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So here is what we propose: Congress should enact a value-added tax, the equivalent of a broad-based sales tax on all goods and services. It should take effect only after unemployment has fallen to a predetermined level or in, say, five years, whichever comes first. Congress should link revenue from the new tax and other sources directly to public health-care spending through a newly created health-care trust fund. The trust fund would pay for all federal health-care spending. This framework would mean that Americans would get the health care they are willing to pay for. If spending outpaces projections, Congress will have to choose between raising taxes and finding ways to slow the growth of spending.
By balancing revenue and health-care spending, such a reform would help solve America's long-term fiscal problems. In the near term, [the VAT] would also support and sustain the economic recovery. Consumers would be encouraged to buy now, before the tax takes effect. And by showing financial markets that Congress is determined to put our fiscal household in order, it would help keep interest rates low and encourage investment. The trust fund mechanism would strengthen incentives to institute reforms that will actually bend the health-care cost curve, because measures to slow the growth of health-care spending would avoid unpopular future tax increases that would otherwise be necessary.
Yes, the United States needs to control its health-care spending. Yes, it is important to curtail low-priority government spending. But the inescapable truth is that deficits will grow unless taxes increase. The bottom line is that an earmarked tax to pay for health care would solve a lot of problems. It may be true that a crisis is a terrible thing to waste. But the failure to prevent a massive future crisis would be a regrettable failure of leadership. |
Meanwhile, the progressive Yglesias wades in and agrees, a VAT would probably be less regressive than the current tax code. He has some nice graphs through the link, and a link to a Mankiw articles.
| Yglesias wrote: |
| In theory, I think the tradeoff between tax efficiency and tax progressivity could be quite the difficult dilemma. But what we�ve got, when considered overall, is a system with lots of inefficiency and almost no progressive impact. That, I think, makes the tradeoff easy. The VAT-only system wouldn�t be my first choice tax system by any means, but the case that it would be an improvement over the status quo seems very strong to me. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Sat Oct 17, 2009 6:32 am Post subject: |
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While a VAT is a terrible tax, it is better than taxing income and property.
A great first step to restore liberty and prosperity to the US would be to replace ALL taxes currently inflicted upon the American people and replace them with one, single, flat, 10% VAT that would be shared by the Federal, State and Local governments.
This should be the total funding available each year for all government activity at all levels. The government should not be allowed to borrow or print money.
Over time, the flat 10% rate should be gradually reduced and never increased. |
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mises
Joined: 05 Nov 2007
Location: retired
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