The Case Against a Value-Added Tax

Publication Date: November 1985

Publisher: Heritage Foundation (Washington, D.C.)

Author(s): Bruce Bartlett

Research Area: Banking and finance

Keywords: Taxes

Type: Report

Abstract:

An economically neutral tax system, one that removes impediments to work, savings, and investment, while not distorting investment decisions, is clearly desirable. The VAT potentially could play an important role in the design of such a tax system. Its virtues are many. Unfortunately, those very virtues make it politically unacceptable. As a hidden tax whose burden is incorporated into the prices of goods and services, it is too tempting a source of revenue for a government unrestrained by constitutional limits on taxing and spending. Therefore, a VAT should not be part of the U.S. tax system in any form--regardless of its apparent short-term benefits, or its attractiveness to academics.