VAT attack

One of President Obama's top economic advisers, former Fed chief Paul Volcker, sug gested this week that it's time for America to adopt a VAT, or value-added tax. The White House yesterday downplayed the idea -- but it's sure to resurface: It's an inevitable consequence of a government that's too big now and likely to grow even bigger thanks to Washington's reckless spending spree.

Don't get me wrong: The VAT -- on top of all the other taxes Washington imposes -- is a terrible idea. Imposing it would pretty well finish the transformation of our country into a European-style slow-growth nation. The right way to close Uncle Sam's gaping deficits is to reverse the continued explosion of federal spending.

The VAT is a type of national sales tax, levied on the value-added at each stage of production. Consider a piece of furniture: The VAT would be imposed when the raw timber is sold, when the sawmill produces lumber, when the manufacturer builds a chair, a tax at the wholesaler level and then when a retailer sells the chair to a consumer.

If the deal was simple and we went across the board with a five-percent national sales tax, and a five-percent flat income tax deal for everyone who makes over $30k a year...then it might sell. In the present form....they will keep income tax going with no real change. It’s a bad deal for the economy, the public, and the future of the country.

I dislike the value-added tax for one reason: the compliance costs are almost as bad as the income tax itself. Is it small wonder why many European economies and the Canadian economy have stagnated since the VAT got implemented?

Maybe it's to show the world how taxation should be done correctly by repealing the 16th Amendment and replacing the entire broken income tax system with this:

To avoid double taxation, each seller along the way gets a credit for taxes paid at earlier stages of the production process. So the final tax to the consumer, at least in theory, is the same as a retail sales tax of the same amount.

I just love those word 'in theory'. Especially when connected to anything gubmint related. But this theory has a hole in in from the start. And it's a HUGH Hole, A money sucking Super Massive Black Hole, and that is 'the po' folk'.

The VAT would hit the 'Rich Guy' buying a yacht, or the Wino buying his morning quart of Mad Dog 20-20. Oops, I mean 'the po' folk'. And THAT will fly like a lead balloon. It won't be a week until the Dems start crying about its 'unfairness' and demanding another giveaway to 'the po folk' who, they cry, "already pay enough in withholding 'taxes'". Even though FICA isn't a 'tax' but your 'Medicare insurance and 'retirement' pension" -- HEY!.. no laughing!

So you can bet the farm there'll be a VAT Rebate Check Box for the 'po folk' on that new 1040A form, just like for the Earned Income Credit. Which reminds me.. why is there a 'Credit' for 'Earned Income' on a tax form that's supposed to Tax all your 'Earned Income'?? Sheesh, and I though the Super-String Theory was bizarre! Oh well, back to the VAT.

The bottom line is that the 'po folk' won't pay a VAT and the 'Rich' will stop buying yachts, and it'll be "FrankTheBaker x 10⁷" who will pay the VAT, like an extra $7K on his new Delivery Van. Until he goes out of business from all the new taxes anyway.

And the gubmint? They'll sit there and say, 'Hey, where's all this VAT Tax Money we were supposed to rake in? We must not be charging enough? Let's raise it!'

That would be true 20 years ago, but today's retailers use cash registers and electronic transaction systems that can forward the sales tax revenue from retail sales directly to the local tax authority as needed. As such, that makes generating revenue from FairTax even faster, since instead of waiting for revenue to come in once or twice a month from various forms of withholding, quarterly income tax estimate payments or once a year from income tax filings, you get revenue at minimum once a day directly from most retailers.

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