VAT Taxes And Fat Government

Well, the unofficial word is finally out now that the current administration is going to pursue the VAT tax strategy to raise even more revenues for Government, Inc.  Under Obamacare and Obamanomics there is no question that taxes will increase dramatically unless other measures are taken to rein in government spending.  Volcker may not be an “official” spokesman for the administration but he is no doubt the straw man for this proposal.  He has been close to the White House and that guy in it for a long time now.  He won’t be throwing out such comments about the need for a VAT without having been given the silent nod of approval to see how well the populace would salute that new flag on the pole.  Plus if you start talking about it , it becomes part of the dialogue and a resigned acceptance begins to seep in.

Of course the government needs certain revenues to operate.  That is obvious.  The first priority should be to discuss and reach a consensus about what the government should be funding and then how much needs to be spent.   Who would want to defend the current Internal Revenue Code?   It is a mess and a true burden on the people and the businesses that supply the jobs for the people.  Many would be more than willing to consider a new method to raise revenues for the government including a type of consumption tax like the VAT,but, but, but that would have to be in exchange for a complete elimination of the current Tax Code, lock, stock and barrel.  Take away all 70,000 plus pages and all those tens of thousands of additional pages of Code regulations and make a fresh start.

Of course with the VAT you will end up with thousands of pages of definitions about what something is and whether it can or cannot be taxed.  That is because to keep it progressive as the left will insist upon, you will have to exclude certain items from the VAT, such as, food, maybe a certain amount of rents, some clothing, etc.   Lord only knows what the “etc” will be.  No doubt it will be an extensive list and then comes those tricky definitions that every special interest group in the world will be trying to craft to protect their self-interest.  Can’t say as I blame them.  For one thing who wants to keep up with all that paperwork that will be required by business to account for and report the VAT taxes due?

Regrettably we all know that the Internal Revenue Code will not be eliminated.  The VAT will be an additional tax to be borne on the backs of the people and a restraint on the growth of business.  It will still come with all those new definitions and regulations.  Of course that VAT will be a new tax on the middle class in spite of the repeated promises of the current administration that they would not have their taxes raised and indeed would receive only tax reductions from the Administration currently in power.   Taxing folks on what they consume with a VAT wouldn’t be all bad because its operation would tax the “wealthier” more because they would consume more.    If the Income Tax were gone you wouldn’t even have to file a return.  That would be nice.   The tax lawyers and accountants would be looking for new specialties. 

That VAT would be a percentage of the GDP and even after you eliminate all the government spending and the exemptions you would be taxing probably 5 trillion dollars worth of transactions annually.  You can make your own estimate from our current GDP of about 14 trillion.   The VAT will probably start pretty low but then be increased by subsequent Congresses as the appetite for more money for government programs grows.  We can’t even make the federal government workers take a pay cut because of their political clout even though they earn much, much more than their private counterparts, why do we think we will ever rein in government spending.  Remember when the Income Tax amendment was first proposed the fellow who said it should be limited to 10% was laughed out of the room. 

It has become a cliche lately that we are becoming like Europe but the cliche does appear to be accurate if these proposals along with all the other expansions of government are implemented.  Cap and Trade, the health care law, EPA rules on carbon dioxide emissions and the tax increases on everything that moves, breaths or exist all combine to turn us in that direction.  Look at their situation, chronically high unemployment because employers are so reluctant to take on new employees, very slow economic growth, and little innovation.  Yes, they have some innovation here and there like Nokia or the Hadron collider but it is paltry compared to the history of the US.  Nanny will be there to look out after us and guide our every step through life but it seems a drab and dreary life to many of us.  It will be a safe secure existence without any spark of inspiration or joie de vivre.  Welcome to our Brave New World.

Give me my free health care, my free education, my subsidized housing and mortgage, my food stamps and my free lunch.


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Filed under business, Economics, government, Politics

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