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Politics : Politics for Pros- moderated
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From: Joe Btfsplk2/15/2005 6:38:22 PM
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A VAT on Both Their Houses?

House Ways and Means Committee Chairman Bill Thomas (R-Calif.) is evidently thinking the big thoughts needed to actually reform both America's wacky tax code and its runaway entitlement system. Not surprisingly, Thomas' ideas are not exactly within the GOP mainstream or part of what the incrementalist Bush administration seeks to do on these fronts.

Thomas is an unlikely revolutionary. He is a prickly technocrat who has simply come to the conclusion that Social Security and its ilk need a fundamental revenue overhaul beyond the Bush personal account gambit, which primarily addresses the payout side of the equation. And like all tax code power brokers, Thomas swims daily in the broth of corporate concerns about a tax code that is dysfunctional and nearly impossible to adhere to without spending millions of dollars in professional fees.

So Thomas has hit upon the idea of replacing the corporate tax code with a value-added tax that would also help fund Social Security. It is a bold idea that could be made even bolder by combining it with a repeal of all or a portion of the payroll tax. This move would help combat the regressivity issues that a VAT would present.

A VAT, of course, represents its own problems: It is a hidden tax that is nonetheless capable of raising vast sums of money from an unsuspecting populace. The interesting question, though, is to what extent have the compliance costs of the current system grown to the point where this hidden cost functions as a tax that rivals any VAT?

suntimes.com
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