What America *Really* Needs is a VAT?!

Wednesday, September 09, 2009 , , , , 0 Comments

Christopher Swann has a commentary piece on Reuters from yesterday promoting the ridiculous concept of a VAT to fund everything from huge and ever-growing deficits to Obamacare.

Swelling deficits and an aging population leave few palatable options when it comes to taxes.

The best choice by far would be the creation of a new value added tax — a “money machine” that can bring in huge sums with relatively little effort. America is alone among rich nations in not charging a VAT, and its continued unwillingness to do so will make it harder to cope with the fiscal challenges ahead.

Giving birth to a new tax will certainly not be an easy sell. The stunning 1980 reelection defeat of Al Ullman, the powerful chairman of the House Ways and Means Committee who had advocated a VAT, is still a warning to American politicians.
The timing of a new tax on consumption may also seem suspect. Aren’t we supposed to be getting Americans back into the malls?

VAT, however, is worth the risk. It could yield enough money to pay for healthcare reform, as well as a meaty cut in income tax and a reduction in the deficit. It could also be done without destroying Obama or the Democrats.

Unlike taxing the rich — which has emerged as a favorite strategy of many Democrats — a VAT is extremely easy to collect. This is partly because it is gathered from each producer in a chain.

Take bread. The farmer, miller, baker and grocer all pay their share of the tax. If the grocer cheats, the government loses only a quarter of its tax. Furthermore, each producer has incentive to make sure its suppliers have paid VAT. The miller becomes liable for the farmer’s share of VAT unless he can prove the tax has already been paid. VAT collection polices itself to a large extent. The sums of money that could be raised are immense, making it easier to strike a political compromise. Exactly how lucrative VAT would be depends largely on which goods are exempt.

Canada, for example, gives up about a third of potential revenue by excusing food, drugs and transportation from the tax. Even if the United States did the same, a 10 percent tax rate could raise $500 billion a year, according to Eric Toder, an analyst at the Tax Policy Center.

Raise the rate to 15 percent and you get $725 billion. (In comparison, income taxes are expected to yield $968 billion this year.)

With all due respect, Mr Swann, are you out of your fucking mind?

Don't plant this seed because it's not as if Congress would consider slashing income taxes in favor of VAT. Oh no, deary, that would be the smart thing. And certainly we know Washington better than that!

Don't give the kids matches. That's all I'm saying.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.