The VAT is next

Cruising in under the radar is the next boot to the face from our government – the Value Added Tax, or VAT. In the face of crushing debt, it is only a matter of time before congress enacts a VAT. Investors Business Daily has this piece by Charles Krauthammer on the inevitability of the VAT.

It’s the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19%. France and Italy: 20%. Most of Scandinavia: 25%.

American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.

Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama’s triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan’s strategy was to starve the (governmental) beast in order to shrink it: First, cut taxes — then ultimately you have to reduce government spending.

Obama’s strategy is exactly the opposite: Expand the beast, and then feed it. Spend first — which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.

And the VAT is the only trough in creation large enough.

Politicians love the VAT because it generates huge amounts of cash behind the scenes, unlike sales taxes which show up on your receipt. It is a cumulative tax on every point of the process, from raw materials to distribution. Producers don’t really mind this because they don’t pay it – you, the consumer, does. It adds additional burden, in the form of administrative costs, to every company and will create even more layers of bureaucracy. According to this article from the Heritage Foundation, it is also an open invitation for fraud and abuse.

VATs are common in other countries, especially in the European Union (EU). Despite the perception that VATs are difficult to evade, data show that fraud to avoid the VAT is widespread in the EU. In fact, the fraud is causing revenue shortfalls large enough that many EU countries are scrambling to prevent the abuse.



One Response to “The VAT is next”

  1. […] up the idea of a VAT to “save” us from a crushing debt crisis. The Value Added Tax (more here) is popular in Europe and you will be hearing much more about it in the coming weeks and months. […]

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