"The Rise and Fall of the Destination-Based Cash Flow Tax: What Was That All About?"

This morning, I was the keynote speaker at the annual conference of the Nordic Tax Research Council, meeting this year in Haikko Borga, Finland (outside Helsinki). I was unable to stay for the rest of the conference, as I am flying to Warsaw later this afternoon en route to Warsaw, from whence I will proceed to Lodz (pronounced "Wooch," I'm told), Poland in order to participate in the annual meeting of the European Tax Law Professors' Association, where I will discuss the future of the corporate residence concept.

As per the title of this blogpost, my talk was entitled "The Rise and Fall of the Destination-Based Cash Flow Tax: What Was That All About?" Perhaps I am presuming a bit, as it isn't officially dead yet. But even apart from its seeming to be dead so far as I can tell, those with more inside knowledge than I have assure me that it is indeed dead, at least for this year. (Speaker Ryan may not have gotten the news yet, however, and appears to be a bit stubborn about it.)

Apart from giving a Nordic audience some background that will be familiar to American tax policy folk, I try in the talk to take a broader look at the U.S. politics around VAT enactment, or rather non-enactment. The key to me is not just stopping with the old Larry Summers joke, but rather asking why the joke's punchline hasn't come true yet and shows no immediate prospect of doing so.

The joke (if that's what it is) goes something like this: "The U.S. doesn't have a VAT because conservatives view it as a money machine, and liberals view it as a tax on the poor. But we'll get the VAT once conservatives realize that it's a tax on the poor, and liberals realize that it's a money machine."

People in the biz always repeat the Summers observation, which through no fault of its own (or rather because of its pertinence) has become a cliche, but they never ask why it might be so. I suggest in the talk that there are rational underlying reasons for it, pertaining to both conservatives and liberals.

The slides for the talk are available here.