The VAT in the Hat

| Tue Jun. 16, 2009 10:48 AM PDT

The New York Times reports that House Democrats are considering a value added tax as a way of financing healthcare reform. A VAT is one of those things that economists and think tankers all love, but it's also one of those things that's never had any real chance of being adopted in the United States.  So it surprised me that Dems were even seriously talking about it.

But Tyler Cowen has a take on this that I hadn't thought of:

From my distant perch out here in Fairfax (and Arlington), I believe this means health care reform is falling apart.  It means the unions won't let them tax health insurance benefits and the CBO won't let them punt on the issue of finance.

Hmmm. That sounds unduly pessimistic.  But given the fact that congressional approval of a VAT is vanishingly unlikely without years of preparing the ground first, the fact that it's being discussed suggests that pretty much all the likely sources of revenue have already been ruled out.  That's not a heartening thought.

The reference in the Times was made almost in passing, and maybe it doesn't mean anything.  I certainly wouldn't make too big a deal out of it at this point.  But I figure it's worth a brief mention as a possible canary in the coal mine.

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