Posted: Mar 16, 2012 5:16 pm
Blip wrote:I confess that I know little of economics so would be (sincerely) interested to learn how an increase in VAT is progressive taxation.
Always happy to oblige:
http://blogs.channel4.com/factcheck/fac ... e-tax/5438
There are two ways of looking at VAT, according to The Institute for Fiscal Studies (IFS): as a proportion of income, or expenditure. The IFS favours the latter, as it’s a better indication of long term household spending.
Over a lifetime, VAT will tend to be progressive because things that aren’t subject to the main rate of VAT are necessities that are consumed disproportionately by poorer households. And so increasing VAT on everything else will tend to hit the poor proportionately less, the IFS told FactCheck.
VAT is “slightly progressive”, the Institute’s senior research economist Stuart Adams said, “Particularly when you look at it over a lifetime.
I wouldn't hold your breath waiting for those arguing that VAT is regressive to support their assertions with evidence.