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Two Lights in the Steeple: The VAT Is Coming, The VAT Is Coming |
Yesterday's Washington Post article on the value added tax, which was commented on by my colleague Marty Sullivan, has generated quite a bit of buzz. From the pros and cons of the whole idea in The Atlantic, to the Wall Street Journal to Fox News, the VAT is suddenly on everyone's radar screen. And it provides me with the opportunity to say: I told you so! That's, right. Just weeks ago, I predicted the British are coming, along with the French, and the rest of Europe in the form of a VAT.
So what is a VAT exactly? Well, it stands for value added tax. The VAT is like a sales tax, but different. It's common in Europe and some call the VAT the most economically efficient tax in the world -- which means it's a money machine. Unlike the sales tax, the VAT is applied incrementally at each step of the production cycle. That means it applies to wholesale, or business to business transactions. The VAT is regressive, which means it hurts the little guy more than the rich. It would also dump tons of money into the government's coffers.
I think this administration lusts for a VAT. And to get myself in real trouble with my friends, I think Fox News got it right in saying the Post story floats a trial balloon for the VAT.
In parts, the Post story absolutely gushes over the wonders of the VAT, saying it's "one of the world's most popular taxes." Now there's an oxymoron if I've ever heard one; like a welcome poke in the eye with a sharp stick. Also, did you know that 130 countries have a VAT? Oh, so the world's greatest economy should start doing what the lesser economies do? Following that logic: I'll bet 130 countries don't have a cool telescope like the Hubble, so let's get rid of ours.
The VAT has advantages, the Post piece proclaims. It's "hard to dodge." Talk to the Brits about how badly their VAT system leaks. "It punishes spending rather than saving." That's true, and it can punish those who can least afford to spend the most. But the best line goes as follows: "And the threat of the VAT could pull the country out of recession, some economists argue, by hurrying consumers to the mall before the tax hits." Wow, now that's great tax policy: Buy now because soon you won't be able to afford anything.
Here's some more: "A gallon of milk would jump from $3.69 to $4.61, and a $5,000 bathroom renovation would suddenly cost $6,250, but the nation's debt would stabilize and everybody could see a doctor." Great. And the doctor will tell them they don't get enough calcium and that it's unhealthy to bathe in that creek at the local park.
But here's the real smoke screen that's starting to show up: A Democrat who believes in progressive taxation would never accept a tax (the VAT) that fundamentally treats the rich and poor the same. Hogwash; it's exactly what progressives want. (Let's get that Wizard of Oz scene intoning "Pay no attention to that man behind the curtain" right out of our heads.)
I'm a great believer in progressive income taxation, which requires those who have more to pay a higher marginal tax rate on the upper levels of their income. And I oppose a VAT. Why? Because I don't want to live in a Socialist country -- if I did, I'd move to France. So, I'm not buying the progressives-won't-go-for-it smoke screen.
I respect the beliefs of those who want socialized medicine and socialized car companies that make only green cars, and socialized banking, and socialized insurance, and a socialized Supreme Court, and socialized housing with a very socialized Fannie Mae and Freddie Mac. But I don't agree with them. And all these things will need the dough only a money machine such as the VAT can provide.
Most of the folks currently in charge of our government don't just want big government, they want HUGE government. President Obama's proposals currently would add almost $10 trillion to the national debt in ten years. And that buys a lot of government. And it's probably just a start. But I'm not buying that they're principled progressives who never inhale.
So, it seems to me that the word "progressive" is now being given a new meaning in tax policy. Because, as with other areas of public policy, "socialist" is still a little too odious.
I think we have started being "prepared." To get the huge government we deserve, we will soon be told that sacrifices will have to made. And the first one is a progressive income tax system. But don't worry; implementing a progressive socialist system that concentrates on what's coming from government rather than the huge taxes you have to put into the government is better for you. Then again, I may just be paranoid. Au revoir for now.
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