Story in the Washington Post here today pointing to the fact that Washington is now toying with the idea of a national sales tax also known as a value-added-tax or VAT. Apparently lawmakers in Congress have been reading books and studies on the subject. Note the above chart, White House vs. the non-partisan CBO budget deficits. Note as well that these numbers do not include Cap and Trade, the Obamanation’s socialized medicine proposals, up and coming bailouts and ‘stimulus’ and others. The pols know these numbers too. They know that our government is broke and broken. I read in Investor’s Business Daily that April federal tax revenues were some 30% less than last year. 
A personal side to this – what are you doing in your household in this recession? Is your income so far this year 30% lower than last year? More? Are you increasing your debt level and consumption to make up for this downfall in your personal economics? Do you think you should? Are you pushing debt to finance your lifestyle onto your children? Or your children’s children? Of course you are not. Why should our government be able to? Since when have we strayed so far from the founding principles of our country?
I digress, Senator Kent Conrad –
“There is a growing awareness of the need for fundamental tax reform, I think a VAT and a high-end income tax have got to be on the table.”
On the table? At what capped rate? At what guarantee that it wouldn’t be raised to infinity on achievers. Or those that wake up early? The effect on the longevity and the competitiveness of our economy? Our prosperity?
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.” Conservative Generation has a background in finance, many of the great posts on his site reflect this, hat-tip to him for the contribution, visit his site here.
As CG said, consumers feel the brunt of a VAT, along with the lower class as well. To justify this perceived injustice, (many liberals don’t like the VAT as they deem it regressive), VAT advocates are pushing that the harm that it may do to the poor is negated by the fact that it may be used to pay for health care for them. You read that correctly.
Listen to this little tidbit from the Post article – “Emanuel, ( VAT proponent), argues in his book that a 10 percent VAT would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal co payments. In his 2008 book, “100 Million Unnecessary Returns,” Yale law professor Michael J. Graetz estimates that a VAT of 10 to 14 perc
ent would raise enough money to exempt families earning less than $100,000 — about 90 percent of households — from the income tax and would lower rates for everyone else.”
ent would raise enough money to exempt families earning less than $100,000 — about 90 percent of households — from the income tax and would lower rates for everyone else.” Really folks? A new tax on every good and service would exempt most Americans from income taxes? Could this be the new version of ‘95% of Americans get a tax-cut’ mantra? Absurd.
A deep recession, a free-fall in government revenue, a myriad of new programs and taxes coming out of Washington. The gambit is on whilst the wool is over the American citizen’s eyes….
A deep recession, a free-fall in government revenue, a myriad of new programs and taxes coming out of Washington. The gambit is on whilst the wool is over the American citizen’s eyes….
Update 1 : Fox News has a new story here on the national sales tax idea, fierce opposition against it….although a national sales tax is an inheritantly different idea, the article seems to parallel it to the VAT….the article also makes points similiar to mine in that the VAT or national sales tax idea is being floated on top of our current tax code….
16 comments:
I can’t believe the numbers. How am I going to live with 10 to 14% more of my income stolen by the government? This has got to get out there and Americans are going to have to get vocal. There is no way I am going to go to work if the government is going to steal 50 to 55% of my income. I will go Galt! Right now, I have it figured that they have taken just over 40% of my income in one tax or another. (I have it documented on my blog.) I am one of those little guys Obama said won’t get a tax increase. What a liar!
Your previous post about Republican’s out of control spending was on the money. The problem is that as bad as that was, Obama and the Demoncrat majority are taking what they see as a blank check to social engineer whatever they please and apparently will spare no expense to the taxpayer. Those of us who pay attention to these things know that won’t work, and I think enough regular folks will come around so that we’ll see a backlash next congressional election. I just hope it isn’t too late by then.
RKL
I could handle a VAT, or more preferably, a national sales tax — if income tax were abolished in return. A consumption-based tax could be done in a more fair way than the current tax on (some kinds of) income. During the 2008 primary, Mike Huckabee make a persuasive argument about the Fair Tax.
But what I would not be down with, at all, would be the current system of income taxation along with a consumption-based tax. If that’s what the Administration is contemplating, count me out.
BB – I agree, It is even worse for myself and my wife, being that we live in CA and both make a decent living, we are hit with 10% CA income tax, upcoming 35% fed (guesstimate), 10% sales tax, property tax when we buy a house, business taxes for our company and others….I think half the country will go Galt. It’s exactly what socialism does – pitting american vs american
RKL – Thank you, I thought I might get a little resistance on the topic, as you say they do have a ‘blank check’ mentality. Boy, I hope it isn’t too late by 2010 as well!
TL – I agree with your points. It seems that A VAT is/will be under consideration in the framework of keeping our current tax code as well. The admin is distancing themselves from this but we’ll see, stranger things are happening right now. The amount of money they are spending and the reckless abandon demonstrated may prove that they will do this. Count out a competitive economy at that point.
More fuel for the July 4 Tea Parties.
RK – Gasoline you mean?
I agree with TL: along with abolishing income taxes in all forms (state, local, and federal), I could get behind a national sales tax as the means of funding the government. If applied equally and fairly, it would certainly be more equitable than the current gargantuan disaster of loopholes, special favors, and downright financial abuse that is the current income tax code.
Of course, that comes with some obvious caveats, like the government making it fair and equitable, and not providing loopholes and special favors which are the trademark of socialist regimes (foreign and domestic). Also, any politician which proposes a VAT without abolishing all forms of income tax should be dragged into the street, shot, dismembered, and pissed on, and then we should have the UAW enforcers go to work on ’em. But otherwise, it’s a workable idea…
And does the news media point out that VATs affect the poor people in the country more than the rich? (I thought liberalism was all about taxing the rich to pay the poor?) Of course the media doesn’t point this out, because somewhere in the liberal psyche, the litle switch that dictates common sense got fused solidly in the off position.
Boy, don’t those tax and spend dems know their history. Does the unions? This has been done before. We used to have a VAT, or a federal sales tax in the past. The numbers on how badly it hits the poor can be documented because the special interest of labor, which later became the unions, were the ones pushing to put an end to the VAT because it devasted the poor so badly. In 1918, they got their wish by having the VAT disbanded and replaced what was to be a more fair and equiable system instead: the income tax. The 17th amendment that gave the government the right to tax us by income was directly from the response to the punitive nature of the regressive VAT. Given how greedy this government is and how we have just a VAT here in California and how we’re getting hammered here economically, this will be the final nail in the coffin to the American economy. Commerce will be taxed and stifled to the point of suffication but they can always blame Bush.
When I read this (I never heard teh term VAT before this) I though this was just like a National Sales Tax, which I thought libertarians liked (good friend of mine is a lib).
I’m not an economist by any means but a National Sales Tax, or something of the like, seems like an inconsistent form for revenue to me. During times of recession, the government probably wouldn’t generate enough revenue. Couple that with outsourcing and the problem is that much worse, not to mention the aforementioned negative effect to the poor.
However I most definitely not accept both an income tax and VAT. The goal should be to put more money in our pockets not take it away. (I know… funny statement coming from me). A double tax (income and VAT) doesnt take into account that living is hard enough, and such a plan, though it may provide healthcare, makes it way too difficult to support one’s self. I think it is an idea being tossed around which is fine for brainstorming purposes, but I’m confident thats not the direction we’ll go in.
Nick – I do believe that there is NO CHANCE that the current leadership would abolish our current tax code if they instituted a VAT system. “any politician which proposes a VAT without abolishing all forms of income tax should be dragged into the street, shot, dismembered, and pissed on.”
Now that is a statement I can stand by….
Euripides – The article did point this out, however from the liberal point of view it seemed to be that they thought the positive outweighed the negative…
Madmath – thank you for the history, when this topic comes up again, I will refer to that tidbit, I didn’t even research the history of it….kudos on the point that a VAT would destroy trade and commerce….
The Law – there is hope my friend, I agree with you here! I agree with you that the VAT alongside the income tax would KILL our economy, the fact that it is even being considered in that context is shocking. I agree as well that it probably won’t fly but in case it gets more serious discussion, I am here to scream at the top of my lungs re: the perils of such an idea….BTW I LOVE your point on it making it ”too difficult to support one’s self”. Very true TL, now my job is to point you in the direction that many of todays actions by out Federal Gov. and the Bush Admin as well before (bailouts,stimulus, unsustainable spending and debt with current tax rates or even tax rates up to Clinton levels), are leading up to that precise thing…..
I agree with LCR that what the government has, it will not let go. As someone on the low end of the income scale who purposely refuses to use Food Stamps to keep the government out of my life… I’d rather work an extra job, thank you… this is scary!
"Graetz estimates that a VAT of 10 to 14 percent would raise enough money to exempt families earning less than $100,000 — about 90 percent of households — from the income tax" Trouble is, they won't exempt anyone after they get what they want. So we'll all be taxed coming & going AND won't have any $$ to spend in a consumer-based economy. So what then? The people go broke, the gov't. gets so far in the red it can't see straight & all private industry fails. Boy, oh boy, but I'll get to stand in line for 6 weeks to have my heart surgery!
It’s time for another TEA PARTY!!
Susannah – You know what’s funny about that? They actually probably WANT that! July 4th is the next round!
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