The Left Coast Rebel Revisits the VAT, Also - Cato's Dan Mitchell: The Vat Economy Killer


by the Left Coast Rebel

When I started blogging a little over a year ago the subject of the VAT, (value added tax) briefly came up. I studied the concept and even discussed it with a liberal reader and a liberal friend off-site. We all came to the agreement that it was a terrible concept and a sure-fire economy/job killer. Here is what I and Conservative Generation wrote in May, 2009:

"For those not familiar with the VAT, basically it is a tax that is levied on on the transfer of goods and services, New Conservative Generation in a note to the Left Coast Rebel illuminated the concept this way" -

"VAT is a little different than sales tax in that it is charged per item purchased as opposed to being tacked onto the final sales price. So instead of 5% of your purchase you might pay 5 cents per item in your shopping cart. VAT taxes work much like sales taxes as far as economic loss goes, which is much higher than income taxes.

The real question is how are they going to implement the VAT? Are they going to tax goods in production or at point of sale? Either way, consumers or workers will bear the cost. The tax is regressive in that it taxes number of items bought as opposed to the amount of the purchase. If you go to the grocery store, odds are there are as many items in your cart as a person with a much higher or lower income. There is also no substitution. You are taxes the same amount for 10 white mushrooms as someone with 10 truffles."
So essentially the VAT is the mother of all tax hikes, hitting everyone, every product, every consumer at every point of production. Frankly I cannot think of a more evil, 'Euro,' socialist concept. The most shocking thing to me is that this idea actually has legs. Even after it was discussed here at the Left Coast Rebel a year ago, I doubted the possibility of it ever surfacing. I mention these things now because we have seen how truly Bolshevik the Obama administration has become, especially since the cram-down socialized health care takeover.

Today I read that the VAT is being so seriously discussed in Congress that the CBO (Congressional Budget Office), is fielding questions from Congress. Also, Dan Mitchell of Cato makes perhaps the most salient points that I have seen in regards to the VAT from the NY Post:

Simply stated, there's no way to finance all this new spending without an added broad-based tax. But this is exactly why we should vigorously resist a VAT.

Blocking a VAT may not be sufficient to control the size of government, but it's necessary. Handing Washington a whole new source of revenue would be akin to giving keys to a liquor store to a bunch of alcoholics.

The real-world evidence shows that VATs are strongly linked with both higher overall tax burdens and more government spending. In 1965, before the VAT swept across Europe, the average tax burden for advanced European economies (the EU-15) was 27.7 percent of economic output, versus 24.7 percent of GDP in the United States.

Handing Washington a whole new source of revenue would be akin to giving keys to a liquor store to a bunch of alcoholics.

Does that sum it up, or what? God help us and America's free-enterprise system.

Uncle Sam graphic via. No Sheeples Here.

2 comments:

  1. The value added tax
    in Germany is levied on the production of goods and services in the country. All business entities are subject to the payment of tax on performing production processes in Germany. The current rate of VAT in Germany is 19%, enforced from 1st January, 2007. In Germany, a reduced tax of 7% is collected from the sale of particular items such as foods, magazines and books. The rate of VAT is set according to the parameters of the European Union Value Added Tax system. The value added tax in Germany effectively earns high revenue for the country in the form of income through taxation.
    Tax on FOOD!

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  2. Right on, LCR.

    The truly pathetic thing about this is that Obambi is simply using the VAT as a stealth way of raising taxes (as he also did with Obamacare and plans to do with Cap and Trade) simply so that he can say he kept his lame campaign pledge that he "would cut taxes for no less than 95% of working families." That's it. He'll put the VAT in place, and then go out and give his constant speeches about how he "only raised taxes on those making over $250,000". Businesses will be crushed, the poor- dare I say it -will get even poorer, and he'll be out repeating his stupid pledge.

    It is the same phony argument that he used in telling us that he kept Obamacare under a trillion dollars, when Paul Ryan demonstrated that the actual cost was well over 2.3 trillion after taking away all the accounting gimmicks. It's the same mechanism he used in claiming that abortion wasn't in the Obamacare bill, that illegals couldn't get access, etc., etc.

    The level of contempt that he holds for us is beyond insulting.

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