Hope of Tax Overhaul?, 10/24/2011

Cain & Perry are riding the public animus for the tax code and appetite for sweeping tax simplification.  Curiously, in apparent contradiction Republicans have abandoned Keynesian stimulus at the same time they seek corporate tax cuts through tax reform.  Then, too, both 9-9-9 and the FlatTax have Value-Added-Tax components, which Republicans have branded as misguided European-style taxation.

Meanwhile, POTUS has lost still another opportunity to lead – this time on tax overhaul. Sweeping tax reform, if done right, holds the promise of making the U.S. more competitive in world trade.  VAT, which is used by all our trading partners and over 150 countries subtracts the burden of government from the price/value comparison, i.e., the VAT is subtracted from exports and added to imports.  No other tax has this permission under GATT rules, and the U.S. remains at a competitive disadvantage for not employing the VAT.

The Perry FlatTax endorsed by Steve Forbes, has as a tax base value added less wages, i.e., taxes wages only once, however it is not recognized under GATT rules for border-adjustability.  Gov. Mitch Daniels, who headed OMB under Pres. George W. Bush, has endorsed a balanced tax plan of a VAT plus a FlatTax on personal income (video): http://wp.me/p18NCA-9n.