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Friday, April 24, 2009

SHOULD THE USA COPY THE EU USE OF A LARGE CONSUMPTION TAX TO FINANCE GROWING GOVERNMENT?

Today's First Buggy Topic

The topic is captured pretty faithfully in the subject-title, with the buggy prof posting in two different threads on it.   The threads were started b Professor Mark Thoma of the University of Oregon and are found at his commendable web-site, Economist's View.  As usual, leaving aside Prof. Thoma comments, the buggy prof was the only poster in the thread who offered a rigorous argument full evidence --- quantitative and qualitative --- that showed a much larger underground economy in the EU as a result of the use of a regressive consumption tax known as VAT . . . a value-added tax that is imposed on end-consumers.  It ranges from about 18 to 19% on the average in the EU to 25% or more.   In the US, which has the smallest underground economy among rich countries, the equivalent figure is a touch over 8.0%.  Click here

When queried about the underground economy,  prof bug clarified his views on the underground economy --- using lots of examples --- in a second thread.  Click here.   It refers to all cash-value transactions that are either concealed from the tax authorities or fraudulently reported.  The studies of the underground economy go back two decades or more, with a use of increasingly improved methodologies that include cross-checking criteria.