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Station joining us Josh -- of the Manhattan institute.
To talk more about the VAT Josh are you in favor of a -- I think under the right circumstances of that could be good policy I think you guys are right to point out that it has to come in as a substitution for other taxes.
There's a reason that most countries in the OECD all the European countries and -- and use -- there are a relatively economically efficient way to raise revenue so.
If you can bring about in this as part of a substitute for for part of -- in contact her for corporate income tax.
That could be a very good thing economically the trouble is if you just throw it in on top of the existing tax code you get all the inefficiencies that are current tax code creates and you -- -- everybody's tax burden.
It's about I don't think would be a good idea but I I wouldn't dismiss about out of hand I think under the right circumstances that -- be good policy.
Did you know what and I'm Marty getting tarred -- via email because I wrote a blog this morning.
Defending a back but -- big big caveat which is something you just mentioned Josh which is if we institute this.
We also must have some kind of subsequent cut either in income taxes on a personal level ornate corporate level correct.
Yeah I mean what -- my preference would be to have a mix you know cuts from both of them and I think you know.
I mean if you look at the current federal spending trajectory which both have nine trillion dollars -- in deficits over the next ten years.
Ultimately it's unsustainable we don't radically reform entitlements we're going to need some sort of tax increase the paper that.
And so I think first of all it's good reason to talk very seriously about entitlement reform -- can save money.
But if we're going to be raising more revenue I think I think that of that should be part of that solution.
And then what you can do as you could you could significantly cut corporate income tax we have the second highest corporate income tax rate in the world second only Japan.
On one thing we could do we brought in about a significantly lower that tax rate and actually make ourselves a lot more competitive in international trade even while the government takes in more revenue.
And one of the reasons that I defended -- bat on the blog was very simply this there is a great percentage of the population I'm not sure what it is some people say 10% 15% etc.
That is an underground economy right -- illegal immigrants.
Drug dealers people who do not report income to the government they don't pay income taxes at least on all or part of their income.
But they do.
By things would this enable us to may be.
I don't know.
Make it a little more equal in terms of the cash economy and making sure that the government is capturing some of that illicit.
I it would it would help to an extent in in picking up people who are in the underground economy although -- note.
That the underground economy doesn't just exist on the income tax side I mean sales transactions in the underground economy won't.
Be subject of that I I don't think you'll see drug dealers charging that when they sell marijuana.
So I think the you know what what and nobody knows what they'll spin on the money though that's the point right and if you're drug dealer.
-- you're -- you're you're making cash you're not gonna report route to the I thought when your 1040 operation you know rusher but you will look at myself.
Right but on the other hand if you're -- drug buyer today currently you're paying income tax on the companies to buy drugs but you won't -- that when you buy them.
So it's you know that there's there's still California and the economy there it gets -- yeah except maybe in California.
But so I think I I think I think there's there's -- correct that in there that you know when when you.
-- consumption tax component of the economy there're there are transactions that are currently missed it will get picked up but there are also current activities that get picked up by compacts.
There will be missed by consumption tax I think the main reasons to look at of that have to do simply with the fact that taxing consumption puts a lot less drag on the economy and taxing income.
-- and so especially an environment where we're talking about a rising tax burden it's important be very mindful.
That that we -- taxes that have low economic burden per dollar revenue raised.
But really -- the long term solutions on this are going to be on the spending side we'll just -- -- -- -- -- -- at our studio which is about a seven iron from the capital.
Right -- that's right now now you know.
As -- DC insider.
Why should say what is the chance as a DC insider that if we add a bat that anything else will be -- Want to just be added and nothing will be cut.
And I think there's actually a decent chance that the that something will be cut now like I don't think it'll be revenue neutral reform ultimately gets on I -- I disagree I would take that back on -- in five years I don't think we're gonna get within five years I think it's going to be more like ten to fifteen.
And I think that's because I mean right now that the government its is borrowing very cheaply and they can Romney's big deficits.
And what politicians in Washington hate doing is making tough decisions and doing things voters don't like voters don't like tax increases they'll -- like spending cuts.
So so long as they can keep running up big deficits without it without -- huge to.
Interest expense Burton.
They're gonna keep doing that so I think it's gonna we're gonna run through much of this decade but ultimately to get the political deal done impose about I think there's gonna have to be some sort of sweetener.
And I think that's going to be in the form of of of tax reductions.
You see bipartisan proposal from.
Democratic senator Ron Wyden and Republican senator Judd Gregg.
That offset some tax increases with cuts in the corporate income tax you also see -- proposal from Paul Ryan has that coming in and and the role offset.
By reductions in other areas of the tax cut especially corporate income tax and and also often personally compacts.
Politically I think that the only way that the Washington -- -- it.
I hope you are right but I will take that bet is a great talk Korea right in the ground floor of our building I'll bet your -- luncheon five years that we've -- that job done.
Yeah I Iran Brian -- just -- -- Manhattan institute.
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