Wednesday, February 17, 2010

Yeah, Prof. Mankiw? I call shenanigans. The good professor seems far too fond of resorting to tax increases as a first concession in the best of times, so long as they are "pigovian". Might I suggest that he is just naturally biased towards a typically New England "high taxation" regime, and only has to look for reasons to cater to this inclination?

Also, there are valid political-economic reasons to despise the VAT, mainly for the same reasons that one should be hostile to government-run health insurance system - once the government is allowed a tool of such intrusive capacity, it will never let go of it, and never cede a dime extracted via its use. The VAT may have a theoretical edge over income taxation, but its practical application offers a significant negative externality in terms of the private-public power balance, or lack thereof.

1 comment:

Mitch H. said...

I see now that Veronique de Rugy was thinking along similar lines. As to why Prof. Mankiw is willing to entertain a VAT - he seems to have the academic disease, and is willing to entertain policy measures in a vacuum, as if governments were run by frictionless spheres rather than men.