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June 08, 2009

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It isn't exactly the most beautiful and expressive of media, is it.

Is it possible it's an aide of his, a la Gavin Newsom? (Although Gavin's aide writes gud English.)

I like Twitter. I've thought through why and know my own counterarguments to "Why would you want to know what someone is doing or thinking every moment of the day??" But rather than debate that, I offer my favorite tweeter, astronaut Mike Massimino.

Hi Noel,

This is off-topic, but I have a question: in Mexico one of the recent debates is over a value-added tax on food and medicine. The argument against is, of course, that it is regressive. If it's really the best and simplest way to increase revenue, why don't they set up some sort of tax credit for anyone who is below a certain income level? Would that just be too cumbersome given the number of Mexicans in the informal sector? Are there any other countries that have VAT deduction or credit in their tax code?

The politics of any sort of tax are dicey. A tax credit, per se, would be fairly cumbersome to administer; people would need receipts and the like. On the other hand, you could have a simplified tax credit, although you'd still need somehow to verify that people were below the ceiling, and write up some sort of marginal schedule for its phase-out. After all, you wouldn't want a situation where your tax bill suddenly jumps once an arbitrary threshold is crossed.

Feeding that into the legislative machine can be a nightmare, which is why Mexico hasn't done it yet.

The U.S. allows you to deduct estimated sales tax payments, which is conceptually similar. In addition, the U.S. has the EITC, which has the same effect as the tax credit you propose, although it isn't explicitly linked to sales tax payments. Several OECD members have a similar system: Austria, Belgium, Canada, Denmark, Finland, France, Ireland, the Netherlands, New Zealand, and Sweden. (Australia has a complex system that seems to effectively mimic an EITC, and Spain has one for families with children.) Unlike Mexico, however, most labor in those countries is in the formal sector, so administration is easy.

The easiest thing in Mexico, I think, would be a massive expansion of Oportunidades. Of course, that could have the effect of turning it into a simple entitlement, which would be good for the country in general but might lead to the disappearance of the program's success in promoting very poor families to invest more in their children.

Did that help?

It was quite helpful, thanks.

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