VAT is progressive - IFS

We believe that increasing the standard VAT rate in the current system is mildly progressive when examined on a lifetime basis. The intuition for this is that, over a lifetime, poorer households spend a higher proportion of their (lifetime) income on goods that are zero or reduced rated in the current VAT system, such as food, children’s clothes and domestic fuel and power, and hence a lower proportion of their lifetime income on items that are subject to the standard VAT rate.


Looking over the lifetime as a whole, what matters is whether the lifetime-rich or the lifetime-poor see a larger share of their lifetime resources taken in VAT, and on that basis VAT is progressive because necessities (consumed disproportionately by the lifetime-poor) are typically subject to zero or reduced rates of VAT.


Thanks to LibDem Voice.

The IFS cannot weigh

In a queue for an expensive lung operation, it would be 'unfair' to put a penniless, jobless and incorrigible chain-smoker ahead of a hard-working young mother who had never smoked - although on the IFS calculation the decision would be 'progressive' because it redistributes income from a richer to a poorer one writes Matthew Parris in his Times column.

“Fairness” is not a morally neutral term, but depends on our idea of deserving. What we think people do or don’t deserve depends on our own ethical framework. Such judgement require us to weigh conflicting claims in the scales of justice. Which way the scales tip depends on how much weight you accord to what you place in them. The IFS cannot help us with that, for though it can count, it cannot weigh. How much weight you accord is a moral question, whose answer depends entirely on your own values. And values differ.

Well worth a read.