Financial Regulation

Reason Writers Around Town: Matt Welch in the New York Post on the VAT Trial Balloon

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Writing in America's most lively newspaper, Reason Editor in Chief Matt Welch argues that a U.S. VAT would be the opposite of the fiscal responsibility in whose name it is being proposed. Excerpt:

With the stunning emergence of the consumption-based Value Added Tax (VAT) as a legitimate public policy option, the Obama administration has now all but made it official: There is no European economic idea too extreme for 21st century America. Even if the Europeans themselves are largely headed in the opposite direction. […]

What's worse for us is that we've pretty much given up trying to address the root problem, which is the decade long spending binge initiated by George W. Bush and then tripled down on by Barack Obama. The VAT isn't a way to streamline a complicated tax code; it's a new spigot to flood money into the pockets of teachers who can't be fired, and securities regulators who can't get enough porn.

Read the whole thing here.

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  1. Dead on, Matt. Obama is doing everything in his power to take us down to Europe’s level.

    1. take us down to Europe’s level

      But they consider it an upward, more enlightened movement. “The United States is the only modern industrialized blah blah blah.”

  2. So now the federal government is pushing to ape Germany and France in paying individuals far-above-market prices for selling their excess solar or wind power back to the electricity grid.

    Racist.

  3. Randian Paul Ryan supports a VAT. (he bends over backwards to call it a BST and avoid the words “value added,” but if you read his roadmap, even those words are there.)

    1. There is a huge difference between an open Sales Tax that is levied only on the final retail good or service and is figured against a (relatively) transparent vehichle, an item’s price.

      This is far different from a VAT which is levied at every stage of a product’s life from seed to salad, or from tree to magazine. The VAT is a hidden tax that is levied against an arbitrary number that is computed by the Tax Man, the “value added” to the item as it is transformed.

      The Sales Tax is open, visible, and reminds a person every time they pay it exactly what their taxes are and who is recieving them. If the prices of items rise because the Governmet raises taxes, the taxpayer knows who to blame and can respond easily.

      A VAT is hidden and obfuscates exactly how much and when you are paying taxes. Prices rise because the tax is raised and the taxpayer is most likely to blame the Business or Service Provider.

      One of those two methods of taxing clearly has a more “Libertarian” feel to it and it clearly isn’t the VAT.

    2. *Addendum – Ryan’s plan calls for a BCT or Business Consumption Tax. While I think there are fundamental flaws with the BCT it is by no means a VAT. It is a one time tax levied against the “consumption” of the business each quarter (Sales-Purchases).

      Ryan’s proposal is also a replacement for current business taxes and is not an additional Tax burden added on top of our already Byzantine Tax code, which is what the VAT would be.

      1. … a replacement for … not an additional Tax …

        You beautiful, naive bastard.

      2. And I quote from the roadmap (http://www.roadmap.republicans.budget.house.gov/plan/)…

        Business Consumption Tax. The proposal creates an 8.5-percent BCT on goods and services. The tax is calculated and administered based on the “subtraction method,” under which a business determines its tax liability by subtracting its total purchases from its total sales. The BCT is then imposed on this net receipts figure (i.e. the firm’s VALUE ADDED) [emphasis mine]

        Sounds like a VALUE ADDED TAX to me.

  4. What problems do you have with the VAT specifically, though? The problems are all related to the fact that we’re deficit spending ourselves into oblivion, but that would be true regardless.

    I am all for a VAT to supplement the income tax (such that it would account for 1/3 to 1/2 of revenue or so.) And if we had a balanced-budget amendment with teeth, then we’d be on the right track.

    The only way that spending cuts will ever happen is if we have to actually pay for our current spending.

    1. Based on what I know of history, the best bet to cut spending is to vote to cut spending.

      Tax increases won’t necessarily lead to spending cuts. On the contrary. If Congress won’t vote politically-unpopular cut spending *now,* when the national debt is so enormous, why would they vote for cuts after a tax increase allows the government to somewhat reduce the debt? The pressure for cuts will be reduced, and the pressure that exists *now,* which one might think would prompt cuts, hasn’t had that result.

      1. They just come back for more. I think we have all seen this happen countless times on the local level as well. Some “emergency” “forces” the introduction of a new tax levy for schools, infrastructure, law enforcement, in other words, all the stuff government does that people actually care about. As soon as they get it, the local pols are emboldened and come back for more. Never fails.

      2. Based on what I know of history, the best bet to cut spending is to vote to cut spending.

        And based on what you know of history, has that ever happened?

        If Congress won’t vote politically-unpopular cut spending *now,* when the national debt is so enormous, why would they vote for cuts after a tax increase allows the government to somewhat reduce the debt?

        Because no population has ever gotten angry enough about debt to vote for people who will reduce it. Taxes get people angry.

        and the pressure that exists *now,* which one might think would prompt cuts, hasn’t had that result.

        There is no pressure to cut spending now. None. I am confident in saying that, because what we’re seeing now is just slightly amplified version of what we’ve seen for the last 50 years and during that time spending has always gone up.

        At the very least, we the current voters should be punished with higher taxes for electing the people doing the spending (as opposed to our children and grandchildren, as anyone who would rather have a deficit than a tax increase is suggesting.)

        As long as we allow our profligate spending to be put on the national subprime loan, we will NEVER reduce spending.

    2. Any form of National Sales Tax must be a replacement for, not an addition to the Income Tax.

      The opposition to the VAT has very little to do with reducing the deficit. It is the hidden, easily manipulated, economy dragging nature of the VAT that most oppose.

      While some tax increases may be needed in the short term to pay off the national debt, the only way to truly balance the budget is large and aggressive spending cuts and reductions in Government services…

      There are other options for the Government to raise the revenue it demands other than a VAT, but none of them are going to be as hidden or as easy to manipulate as the VAT.

    3. The problem specifically is that the VAT is unnecessary. It’s merely a scheme to hide the tax from the consumer. A national sales tax would accomplish the same tax revenue gathering function, with far less of a burden on business.

  5. if we had a balanced-budget amendment with teeth, then we’d be on the right track.

    And if your uncle had tits he’d be your aunt. A balanced budget amendment ain’t happening. The fed loves to print money, apparently, so forget it.

    1. I never said it had a chance in hell of happening.

      1. I know. I was just stating the obvious.

        1. And this NEEDS to be kept being stated.

  6. I’m starting to wonder if these clowns really will be able to ram through cap and steal, card check, and a VAT all before November. Perhaps they’ll put it all into one 15,000 page bill. I’m accepting applications for the title of this bill. I’ll start:

    “Rainbow Farting Unicorns for Children Act of 2010 – with Jobs”

    1. No way. They blew their wad with Obamacare — and if that hadn’t been approved by the Senate before the MA special electrocution, they wouldn’t have been able to even do that.

      And to the extent that the Dems were able to delude people with the “when we pass it you’ll see how good it is” line for that bill, they’re not going to be able to do it for any subsequent bills.

  7. POP!

  8. The only time I saw a vat so full of bad things as in Shakespeare’s MacBeth.

  9. America’s most lively newspaper

    I wouldn’t know. Their website sucks so hard, I never, ever follow a link to the Post.

    1. Websites like the Post are one of the reasons I click onto the Print version of the article almost immediately. Same article on one page without all the crap.

      1. I usually surf to unfamiliar pages with only cached images, and open up only the necessary images. The NY Post is lousy and bloated, even without the images.

  10. Value Added Tax will annihilate small business, and bring the cost of production to the point where it’s not viable on US turf. Large companies will offshore their operations; small ones will become extinct.

  11. I applaud Obama’s brave efforts to bring government healthcare and a Value Added Tax to the United States.

    In fact, I approve of pretty much everything that Obama has been doing.

    I plan to be abroad in time to witness the fall of the Great Whore of Babylon, whose wine has corrupted all the nations of the world.

    Go Obama! Bring ‘er down!

  12. The same crew that was promising less than two years ago that any repaid bailout funds would go to reduce the debt is now spending those repayments on new programs.

    There is no chance (nada, zero, bupkiss) that a new tax won’t go into new spending. Oh, we might get a year or two of budget surpluses to pay down debt out of it, but no more.

    No way. They blew their wad with Obamacare — and if that hadn’t been approved by the Senate before the MA special electrocution, they wouldn’t have been able to even do that.

    All they have to do is roll one (1) Republican Senator. The hideously misguided fast-track too-big-to-fail financial regulation bill is going to pass (they’ve already got Snowe, and other Repubs are lining up to vote for a “bipartisan” bill.

    Its entirely possible they could get a VAT through, or cap and trade, or something else. I have a hard time seeing them get more than one major bill through, but I bet they get one more. There are plenty of Repubs who are squishy as hell on gerbil worming, and plenty who could probably vote for the VAT as a “fiscal responsibility” measure.

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