The value-added tax appears in these episodes not as a subject argued on its own terms but as a recurring point of comparison — a tax other countries have and the United States does not, invoked to illustrate fears about revenue growth, to mark the outer bound of American taxation, and to explain the unusual structure of U.S. federal revenue.
The stealth-tax framing
In a July 2017 episode with Will Wilkinson, Bob Zadek raised the VAT while pressing Wilkinson on the political dangers of a guaranteed minimum income. Zadek asked whether opening the floodgates to wealth transfer starts a process in which the guarantee increases without limit, and he compared that prospect to what he called the fear of a value-added tax, a VAT tax, which they have in Europe, where the tax keeps on increasing and it is a stealth tax Will Wilkinson: G.O.P. Should Embrace the Welfare State (2017). Zadek’s worry was that there is no ideal level of wealth transfer and that, as with Obamacare, once the process starts it is very hard to undo or to modulate the amount.
Wilkinson did not take up the VAT directly. He answered the slippery-slope concern by pointing to comparative data, arguing that countries with high tax rates and big welfare states do well on property-rights measures in the Fraser Institute and Heritage economic freedom indices, that Canada — with single-payer healthcare — comes out higher than the United States on economic freedom, and that many large-government countries rank at the top of Cato’s personal freedom index Will Wilkinson: G.O.P. Should Embrace the Welfare State (2017). The VAT thus entered the exchange as Zadek’s illustration of a ratcheting tax, and the reply addressed the ratchet thesis in general rather than the VAT in particular.
Henderson: the 17–18% ceiling and the European divergence
David Henderson gave the VAT its most sustained treatment in a March 2019 episode on Trumponomics, deficits, and immigration. Discussing the national debt — which he and Charlie Deist placed at 20 trillion dollars, with a deficit Henderson estimated at around 800 billion — Henderson described a long-standing pattern in U.S. fiscal history: the federal government has kept revenues over roughly 65 to 70 years at around 17 to 18 percent of GDP, as close to a constant as you will find in macroeconomics David Henderson on Trumponomics, Deficits, and Immigration (2019). When revenues approached 20 percent, he said, tax cuts followed — under Reagan at the end of the Carter administration and under Bush at the end of the Clinton administration.
Henderson identified the VAT as the one thing that could undercut that constant. He acknowledged that many economist friends say the United States should have a value-added tax and that he understands the economic arguments for it, but argued that those arguments fail to account for how the politics would change. In his account, a VAT would breach the 17 to 18 percent figure and begin moving the country toward European levels of taxation David Henderson on Trumponomics, Deficits, and Immigration (2019). He drew on the mid-1960s, when European countries imposed value-added taxes as part of European Union agreements. Some countries adopted the tax intending revenue neutrality, some intending to reduce government revenues as a percentage of GDP, and some intending to increase them. Henderson said the countries that adopted it to increase revenues succeeded, those that sought to hold revenues constant failed, and the one he recalled seeking to reduce revenues as a percentage of GDP also failed. On a chart of government revenues as a percentage of GDP, Western Europe starts a little higher than the United States and then diverges sharply after the mid-1960s — the period, in his telling, when Western Europe acquired very large government.
Henderson’s conclusion was that a standard optimal-tax analysis can show a value-added tax to be better, but only by holding constant the amount of revenue raised — the very thing he said should not be held constant. On what he expected would actually happen, he opposed a VAT David Henderson on Trumponomics, Deficits, and Immigration (2019).
Lesperance: the missing VAT and the Golden Geese
In a November 2020 episode on high-net-worth emigration, David Lesperance offered a structural account of U.S. revenue in which the absence of a VAT is a defining feature. The U.S. revenue model, he said, is to an extraordinary extent dependent on personal income among G20 countries, and that is because there is no value-added tax, which is prevalent in most other countries The Flight of the Golden Geese (2020). Depending on how the calculation is done and whether personal contributions are included, he put individual-sourced revenue at anywhere from 40 to 70 percent of total government revenue.
Lesperance’s argument concerned the concentration of that burden rather than the VAT as such. He said the United States is over-dependent on personal income tax and, within it, on a tiny number of taxpayers he called the Golden Geese, who in the U.S. case account for 40 percent of total personal tax revenue. Because of globalization and mobility, those taxpayers are the least sticky: they can maintain their business and personal lifestyle in a variety of places, and if a small number leave, the negative effect on revenue is asymmetric. He cited Emmanuel Saez and Gabriel Zucman, whom he described as protégés of the French economist Thomas Piketty, as having written in the Wall Street Journal that it is very difficult to leave the United States, and he disputed that claim, saying he had been helping Americans leave for over three decades and that record numbers were doing so The Flight of the Golden Geese (2020). In this episode the VAT functions as the counterfactual: the tax most other countries have, whose absence shapes the U.S. dependence on mobile individual taxpayers.
Transparency and the price of government
A December 2020 episode with Chris Edwards touched the same family of concerns without naming the VAT. Zadek argued that since consumers ultimately pay all taxes, he would want every consumer to receive a single bill from the federal and state governments stating a pro-rata share of running the government, rather than having taxes buried in the price of goods — as with a sales tax that consumers barely notice, or the itemized taxes on utility, cell phone, and cable bills that no one reads Is it too late to step back from the edge of fiscal insanity? (2020). He extended the point to corporate income taxes, tariffs, and airline travel, all of which carry embedded costs that consumers experience only as higher prices, and said government has been skillful at having others serve as its tax collector so that the heat falls elsewhere.
Edwards agreed entirely, describing taxes as the price of government whose price should be labeled clearly and transparently, and proposed eliminating excess tax bases — for states with both an income tax and a retail sales tax, dropping one of them. He offered Washington state, with a sales tax and no income tax, and Oregon, with an income tax and no sales tax, as good systems Is it too late to step back from the edge of fiscal insanity? (2020). The segment is about visibility and simplification rather than about a value-added tax, but it shares with the other episodes the premise that the true cost of government is routinely hidden from the people who pay it.
Across episodes: no developed arc
The excerpts show no development in the treatment of the value-added tax across episodes. Zadek raises it in 2017 as a stealth tax that keeps increasing; Henderson in 2019 treats it as the one mechanism that could break the 17–18 percent revenue ceiling and cites the mid-1960s European experience; Lesperance in 2020 treats its absence as the reason for U.S. dependence on personal income tax and on a small number of mobile high earners; and the 2020 Edwards episode discusses tax transparency without naming it. Each speaker uses the VAT for a different argument, and no episode responds to another’s characterization.
What the sources do not cover
The excerpts do not describe how a value-added tax is structured, how it is collected, or what rates any country applies. They do not name any American VAT proposal, bill, or sponsor, and they do not report any U.S. legislative vote on the question. Henderson’s recollection of which mid-1960s European countries adopted the tax for which revenue purpose is given only in general terms, with no countries named. The Saez and Zucman argument is reported secondhand by Lesperance, and the excerpts do not include the Wall Street Journal piece itself.