Charles Krauthammer seems to grudgingly endorse the idea of a value-added tax, but one can tell that his heart is not in it. I can certainly understand why, but Krauthammer may potentially have reason to be a bit more enthusiastic. As noted in my interview with Bruce Bartlett, the implementation of a VAT can be combined with a significant cut in income and corporate taxes which would reduce the burdens on individuals and individual corporations, while at the same time, enhancing revenue by broadening the base. In short, a legislative package may and should be constructed which will bring about lower taxes in exchange for a VAT that will increase revenue without distorting the economy the way higher income and corporate taxes do.
This could give us both badly-needed tax reform, and a significant increase in federal revenue. I should note as well that the fact that Krauthammer is seriously contemplating the implementation of a VAT means that the idea is catching on. I won’t be in the least bit surprised to see more people on the Right sign up in support of a VAT as the best way to address the current fiscal crisis without dampening the economy in the process.