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Location: St. Louis, Missouri, United States

Thursday, January 05, 2012

The Fat in the VAT

Timothy Birdnow

Here comes the VAT:

From this Wall Street Journal article:

"In a recent interview on these pages, presidential candidate Mitt Romney refused to rule out a value-added tax (VAT). He suggested that this hidden form of a national sales tax—which is embedded in the prices of goods and services during the production process—might be appropriate, particularly as a way of financing other tax cuts.

He's not the only Republican to speak favorably of a VAT. Herman Cain's 9-9-9 tax plan featured a flat tax and national sales tax. Very few people realized, however, that the final 9 was a VAT. And Rep. Paul Ryan, the chairman of the House Budget Committee and a favorite of the tea party thanks to his bold reforms to modernize Medicare and Medicaid, includes a VAT in his "Roadmap" plan, where it helps finance other reforms such as eliminating the corporate income tax.

What's going on here?

Most Republican supporters are drawn to the VAT for relatively benign reasons. It is a single-rate system, like the flat tax, for raising revenue, so it does not raise the possibility of class-warfare demagoguery. The VAT also doesn't hit savings and investment. And there are no distorting and corrupt loopholes. So there's a lot to like about the levy—or would be, if there were some practicable way of substituting a VAT for taxes on income.

Others assume that taxes eventually will be increased and they'd prefer to raise revenue in a less-destructive fashion. Better to impose a small VAT, the arguments go, than allow higher marginal tax rates on personal and corporate income to distort and discourage work effort and growth-enhancing investment."

End excerpt.

Now, a Value Added Tax is a terrible import from Social Democracies in Europe. It taxes products from the ground up, as it were, adding a tax whenever "value" is added to something, meaning at every stage of production and transportation. It's a hidden tax, because it gets built into the cost of goods.

Now, we need that like we need another Presidential bid by Al Gore. (Speaking of Al Gore, he was the driving force behind the Clinton Administration telephone surcharge, where Gore ordered the phone companies not to itemize the tax on consumer bills, so the company would take the heat and not the Administration.) The VAT is the ultimate dirty tax; it remains hidden in the cost of goods. Consumers will notice inflation across the board, but the government will blame industry and perhaps begin hearings and drag company executives in front of government grand inquisitors. When they blow through the money they will simply raise the VAT and do it all again. The corporations have to eat crow, and the public has to pay more for everything, but by yumpin' yimminy the bloated State makes out without missing so much as a late night snack.

A VAT has much the impact that the Income Tax had; it expands the reach of government enormously.

Part of the reason why I oppose a national sales tax is because of the problems of transparency; it would be easy to hide increases in the price structure and blame "gouging". I also don't like it because it would require a Constitutional amendment, and another amendment to rid us of the Income Tax. Doubtless we'll get the amendment for, but the repeal will not be forthcoming. Ditto a VAT. We'll simply end up with two taxes instead of one, and there is STILL no way to get at the real source of the problem, which is government spending. Without some sort of iron-clad restrictions on what our government spends not one single penny of new revenue should be added. It's rather like Whimpy from Popeye the Sailor "I will gladly pay you tuesday for a hamburger today" but only on the scale of the entire history of American fast food, with millions of Whimpy's who have no intention of paying back their debt. You don't lend money to goldbricks.

No. What is needed is the exact opposite approach; cut taxes to choke off the government's revenue stream, and impose a Balanced Budget Amendment on the government - one not open to manipulation of figures. Government is like an alcoholic; one dollar is too many and a trillion aren't enough. They need to be restricted to what they need to run the basics, and nothing more. There is no hope as long as we continue to feed the beast.

Which is what Romney, Gingrich, even Herman Cain, are all prepared to do. The people on our side are as much about big government as are the Democrats; they just use austerity as a political tool. Ron Paul may be the only one candidate who would really try to implement an austerity program. Unfortunately his tax base would shrink precipitously when the Iranian nukes take out our cities...

The Tea Party's genesis was spending; first under George W. Bush, then the tidal wave under Obama. Yet there is no-one willing to cut spending. Not one.

The Bible says that a nation is given the leadership it deserves. America has a terrible lack of leadership. Any questions?

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