Journalist Catherine Rampell asks why the government of the United States, following the lead of “nearly 150 other countries, in developed and developing economies alike”, does not collect some type of VAT (sometimes called, as in Canada, a “goods and services tax”, or GST).
Her answer?
Politics, mostly. Back in 1988, Lawrence Summers — now President Obama’s chief economic adviser — explained this with an observant quip: “Liberals think it’s regressive and conservatives think it’s a money machine.”
If they reverse their positions, the VAT may happen, he said.
Catherine Rampell, “Value-Added Taxes: Not So Foreign”, Economix, 11 December 2009.
For a clear explanation of how value-added taxes work, see Ms Rampell’s New York Times article:
Catherine Rampell, “Many See the VAT Option as a Cure for Deficits”, New York Times, 11 December 2009.
Ms Rampell’s NY Times profile explains “Catherine grew up in South Florida (the New York part) and graduated from Princeton”.
Tags: Larry Summers
