Right Hooks

Caution Needed on Tax Reform

Beware of the value-added tax and carbon tax ideas being considered.

Jordan Candler · Apr. 4, 2017

Republicans are still trying to recover from the recent health care debacle, but already there are early warning signs that tax reform — at least in its initial stages — will likely be headed for significant pushback from conservatives. Based on information from anonymous sources, The Washington Post reports that a value-added tax and a carbon tax could (and we stress could) be included in the White House’s tax reform package. The GOP should be waving the red flags at both proposals.

The Post writes, “The search for new options reflects a recognition of the political challenges facing a proposal known as a border-adjustment tax that the White House and some Republicans had begun to rally around.” But swapping the BAT for a value-added tax (VAT) is assuredly not the answer. Some conservatives disagree, but in our view the VAT system is a stealth way to raise taxes so that people can’t see the increase, and nobody’s talking about replacing the income tax with it. In Europe, it’s used as a convenient way to bankroll welfare. This defeats the purpose, because it ultimately only creates another problem in need of a solution.

As for a carbon tax, the idea is a scam. Economist Stephen Moore calls it “a tax on American energy consumption. Since energy is a central component of everything that America produces, it would make the cost and thus the price of everything — and I mean everything — produced in America more expensive. It is a tax that only China, India, Mexico and Russia could love.” And to benefit what, exactly? As Moore goes on to explain, “[T]here’s a strong likelihood that the carbon tax would end up not being a replacement for [the EPA’s] economically destructive policies. Instead, it would simply be another addition to the regulations.” Additionally, regulation-averse countries like India and China will reap the benefits of U.S. outsourcing, which, ironically, would actually increase carbon emissions.

In the end, the most important thing for Republicans — conservatives and moderates alike — to remember is Ronald Reagan’s ever-applicable observation: “The problem is not that people are taxed too little, the problem is that government spends too much.” The GOP should read the writing on the wall right now. Neither the value-added tax nor the carbon tax are acceptable alternatives and both should be completely abandoned.. And what the party doesn’t need is another embarrassing last-minute congressional dispute similar to what derailed the American Health Care Act. We’ll know soon enough whether they’ve learned that lesson.

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