Thursday, April 8, 2010

Obama Advisor: Throw the Country Into a VAT

Our country might be getting pushed into a VAT, the dreaded state of a tax on everything productive. At a New York Historical Society event yesterday Paul Volcker, Chair of the President’s Economic Recovery Advisory Board, said that the United States should consider a European-style value-added tax (or VAT) to help tackle the soaring government budget deficit.


A value-added tax is basically a tax levied at every level of the manufacturing process on the amount of value added to the product by each additional producer. So if the end product is widgets, one producer is taxed for the “w,” the next producer is taxed for adding the “i,” another for the “d,” and then another, another, and another for the “g,” “e,” and “t,” respectively. And then, at the end of the production cycle, all these taxes are passed on to the end consumer--you, me, and everyone else. However, when a consumer buys goods in a VAT system the true depth of the value-added tax doesn’t show up on the receipt because the bulk of the tax has already been paid by producers.


It’s a particularly appealing tax to big-government politicians because, as Ronald Reagan put it back in 1985, “a value-added tax actually gives a government a chance to blindfold the people and grow in stature and size.” “The Great Communicator” went on to warn of the insidious nature of the tax: “[I]t’s hidden in the price of a product. And that tax can quietly be increased, and all the people know is that the price went up, and they don’t know whether the price went up because somebody got a raise, or whether the company wanted to increase profits, or whether it was government.


So if the government imposes a VAT system on us, politicians will have a clandestine vehicle for raising taxes. (Yikes!) In a VAT, our economy will be damned to slow growth for decades and every manufacturer in the land will be trapped in a morass of paperwork and government bureaucracy. The European Union’s VAT laws are so complex they had to create an eLearning course to help their citizens and bureaucrats navigate the tax code.


And folks, the VAT isn’t replacing a current tax; it’s just more gasoline being poured onto the fire.


How did it come to this? What happened to the Obamacare deficit reduction? Congresswoman Kilroy promised we were going to spend a bunch of money we don’t have and, as the money rolled out, it would lower the deficit. Hard to believe that line of reasoning, but she said it would be so. The Democrats rolled out their “Mission Accomplished” banner and told us they had deflated the ballooning budget deficits. So why, then, do we need a value-added tax?


Apparently, we were lied to--and by those bastions of trustworthiness in Congress no less. The outrage! The shock! The… total predictability.


Speaker Nancy Pelosi hinted that this was phase II of the Obamacare plan back in October 2009 while appearing on the Charlie Rose program. “[European governments] get a tax off of [a value-added tax] and they use that money to pay the healthcare for their own workers… Somewhere along the way, a value-added tax plays into [American healthcare reform],” and then as an afterthought, “Of course, we want to take down the healthcare cost, that’s one part of it.





So throwing the taxpayers into a VAT has been the plan all along, apparently. The Democrats certainly weren’t very forthcoming about that.


The new tax burden to pay for Obamacare doesn’t end there, unfortunately. Mr. Volcker also said that it may be necessary to develop a carbon or other energy-related tax.


Hopefully, when Obamacare kicks in it’ll cover backs broken by the tax burden.


Would anyone else rather have a Congress that adds value than a value-added tax? I know I would. Let’s toss the bums out!