The Value Added Tax

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Taxes are high enough already, yet the government still can't scrape together enough money to pay for every imaginable project. Rather than reducing spending, which would seem to be the obvious solution, the answer is always higher taxes and new forms of taxes. The value-added tax would be a national sales tax on top of all the other federal and state taxes we already pay.

The newest items are at the top of the page.  The earliest hint of a US VAT (on my web browser) appeared in May 2009.

The 5 Big Problems with Andrew Yang's $1000-a-Month Universal Basic Income Proposal.  [#2] It creates a massive new VAT.  Andrew Yang is proposing to pay for UBI with a gargantuan new 10 percent VAT to go along with some mostly undefined cuts in welfare programs.  In case you are unfamiliar with a VAT, it's a very popular tax around the world because it taxes products at every stage of development while passing the costs on to consumers.  It's a LITTLE like the gas tax in that respect.  You curse the gas companies because gas is so high, but you don't realize that you are paying much more in taxes than the corporation is receiving in profit.  If we end up with a 10 percent VAT that we pay ON TOP OF all the other taxes we have, the safest bet you could ever make would be that the VAT is going to skyrocket in coming years because there is no better way on earth for the government to soak the middle class without people realizing who's really taking the money out of their wallets.

Debunking VAT Myths.  The value-added tax is a very dangerous levy for the simple reason that giving a big new source of revenue to Washington almost certainly would result in a larger burden of government spending.  That's certainly what happened in Europe, and there's even more reason to think it would happen in America because we have a looming, baked-in-the-cake entitlement crisis and many politicians don't want to reform programs such as Medicare, Medicaid, and Obamacare.  They would much rather find additional tax revenues to enable this expansion of the welfare state.  And their target is the middle class, which is why they very much want a VAT.  The most frustrating part of this debate is that there are some normally rational people who are sympathetic to the VAT because they focus on theoretical issues and somehow convince themselves that this new levy would be good for the private sector.

The New York Times Is Dumber Than I Thought.  A small tax doesn't seem like a lot but when you are trading trillions of dollars every day it does.  The initial jobs that get eliminated will be the lower level jobs where people start.  This tax will extinguish opportunity for young people entering the industry.  A transaction tax is a totally sexy idea to someone that is not familiar to markets.  But, once enacted they will become very familiar with it as all kinds of bills go up; from the grocery to the fees banks charge them to handle money.  Basically, anywhere they transact business will be more expensive.

Carbon Tax, Value Added Tax, Sales Tax — and Puerto Rico.  Just one more tax and our political masters will be through.  Rand Paul's cure for the income tax is a 14.5% value-added tax.  Oh, he doesn't call it a VAT, it's a "business-activity tax."  A VAT by any other name still smells as foul.  Unlike a sales tax, VAT captures revenue for the government at every step along the supply chain as raw materials are turned into finished goods.  Anyone who adds value to the product pays VAT on their profit minus the VAT paid by the preceding business.  But what about me, the end consumer?  I add no value to the product, yet I pay the full VAT on something whose price has necessarily risen due to the taxes paid by all the processors upstream from me.  So "VAT" is a misnomer.  It should be "VAT cum sales tax."  But that is unwieldy, and, more importantly, it would give the game away.

Uncle Sam Is Coming After Your Savings.  Once you've hit your fiscal capacity to tax the rich, a few big sources of tax revenue are left:  [For example,] A value-added tax.  Very efficient and generates a lot of money because evasion is very difficult; it is almost self-enforcing.  It minimizes economic distortion, and what distortions it does introduce encourage savings over consumption.  It is also highly regressive.  So it's hard to see where the political support will come from:  Progressives hate the regressivity, conservatives, the imposition of a large new tax that will squeeze a lot of money out of people.

Texas VAT Bill Would Threaten State's Prosperity.  Boasting the laudable goal of eliminating property taxes throughout the State of Texas, a recently filed Value-Added-Tax (VAT) bill — House Bill 3472 — would replace not only property taxes, but also business franchise taxes, a limited statewide sales tax, and various other local sales taxes with a VAT.  Texans have never experienced the economically depressing effects of a VAT, but once they realize what those effects would be, they will oppose any VAT in order to preserve their state's prosperity.

Sorry, middle class. The VAT may be inevitable.  If the government fails to enact structural reforms in spending, an entirely new source of revenue will be needed.  The most likely one is a value-added tax that would crush the middle class. [...] If Washington gridlock persists, the big new tax is a virtual certainty.  The most probable choice will be a VAT.  Since the VAT is assessed on things people buy, not their incomes, it falls heavily on the middle class.  Suddenly, the issue is sneaking into the fiscal debate.

VAT: The Nightmare Tax Gets Proposed, Again.  Former South Carolina Senator Fritz Hollings in the Huffington Post [suggests we] cancel the 35% corporation tax and to replace it with a 6% VAT scheme.  He seems to think that just because the rest of the world has this, especially Europe, it can't be all that bad.  That might seem clever — after all, 6% is less than 35%, right? — but there is a hidden cost to VAT that is paid by both profitable and unprofitable businesses.  And remember, before almost any startup makes a profit, it makes a loss.  VAT doesn't care about profitability.

Will Republicans Hand the Left a VAT Victory?  In a recent interview on these pages, presidential candidate Mitt Romney refused to rule out a value-added tax (VAT).  He suggested that this hidden form of a national sales tax — which is embedded in the prices of goods and services during the production process — might be appropriate, particularly as a way of financing other tax cuts.  He's not the only Republican to speak favorably of a VAT.  Herman Cain's 9-9-9 tax plan featured a flat tax and national sales tax.  Very few people realized, however, that the final 9 was a VAT.

9-9-no way.  Herman Cain's 9-9-9 tax plan has become center stage of the Republican presidential nomination race and for good reason.  The American tax code has grown into an unwieldy beast.  Self-serving politicians hell-bent on controlling you and enriching their cronies have morphed it into a multiheaded Hydra with endless loopholes, exceptions, subsidies, giveaways, penalties and more.  Cut off one head and another grows back in its place.  This monster can't be tweaked, massaged or even reformed.  It must be killed.  And Herman Cain wants to give it a death blow with his straight-forward 9-9-9 plan:  a 9 percent personal income tax, a 9 percent corporate tax and a 9 percent national sales tax.

Woman with 15 IDs gets 7 years for multiple VAT fraud.  A Bristol woman has been jailed for using a complex web of 15 different identities and companies to defraud the Revenue out of £118,000.  48-year-old Alison Reynolds was jailed for seven years yesterday for VAT fraud and police offences.  Reynolds was found guilty of four charges of cheating the Public Revenue, one charge of using a false identity document and several forgery offences.

Could VAT Follow Corporate Cut?  Many were startled to hear President Obama tell the U.S. Chamber he supports a corporate tax cut.  Is it a ruse to get Republicans on board a value-added tax?

Value-Added Tax Would Hurt Economy, Kill Jobs, Business Group Study Finds.  An economic analysis sponsored by the National Retail Federation (NRF) shows that a Value-Added Tax (VAT) would damage economic growth and kill hundreds of thousands of jobs.  The study showed that a large reduction in federal spending would be better for the economy.

The VAT sometimes goes by other names.
Hawaiians Loudly and Successfully Object to Proposed Tax Increase.  [Scroll down to page 8]  Hawaii's General Excise Tax (GET) is a multilevel sales tax on all goods and services, including food and medicine.  Because of its compounding nature on the gross income, receipts, or proceeds of all business activities, the GET, at a base rate of 4 percent, is comparable to at least an 11 percent sales tax.  In addition, Hawaii's GET is more regressive than most sales taxes, as many states and local governments exempt items such as food and medicine but the GET does not.  Currently the GET rate in Hawaii is 4 percent except for the island of Oahu, which charges 4.5 percent to fund a $5.3 billion commuter rail project for the island.

Democrat 'Suicide Bombers'.  [Scroll down]  Let's just think this through, which the Democrats obviously haven't.  Both the Cap-and-Trade bill, and a VAT imposition, would raise taxes on everyone in the country. ... These new taxes are not the type that can be withheld from a paycheck, or tacked discreetly on everyone's phone bill.  They are the type that will be paid every day.  They will be paid at the gas pump.  They will be paid at the checkout line in every store in the country.  They will be paid every single day.

We Need a VAT? We Already Have One.  Democrats in Washington are struggling to find a solution to the huge deficits created by the Obama Administration spending spree.  The Commission on Fiscal Responsibility and Reform recently had its first meeting, and they are widely expected — after the November election, of course — to recommend a national VAT tax as the best way to solve the revenue crisis.  The problem is that we have a VAT already.

VAT Should Be Taken Off Table ASAP.  Adding up all of the annual deficits, the national debt will more than double by the time today's newborns reach just the fifth grade.  Many in Washington believe the solution to this problem is to raise taxes.

Democrats at Ramming Speed.  The president's National Commission on Fiscal Responsibility and Reform, which began its work last week, is required to submit a plan for serious deficit reduction by Dec. 1, four weeks after the November election.  Its recommendations are non-binding, but a lame duck Congress would be in position to take them up, including a possible VAT.  Should Democrats suffer a landslide defeat, their large majorities would still be in place for the lame-duck session.  What would Democrats who'd been defeated for re-election have to lose by voting for a VAT?  Not much.

Is There a VAT in our Future?  There is an "emerging consensus" that we are headed for a Value-Added Tax (VAT) in the United States.  But the more optimistic among the experts and pundits believe it won't come until after the 2012 election and then only if President Obama is reelected.  There is no doubt that something will have to be done about the financial crisis and the federal debt — even if ObamaCare is repealed — and many believe the "hidden" VAT is the politically viable solution.  Many openly say that the VAT, with its costs hidden in the price of commercial products, is the only way to get the money to pay for ObamaCare.

Value Added Tax and Illegals.  It is impossible to know the specific amount of future dollars produced by any tax that changes the cost of goods.  When someone tells you the VAT will produce "X" number of tax dollars in revenue, don't believe it.  When the price of something goes up, less of it is purchased.  Thus, estimates of how many tax dollars will result from a new sales tax are usually less than accurate.

Liberals Seek VAT to Pay for Big Gov't.  What is a president to do when his gargantuan spending increases threaten to double the national debt and push the federal government into insolvency? ... Well, President Barack Obama may take a page out of the European social democracy playbook by employing a new Value Added Tax (VAT) as a means to balance the federal budget on the backs of American consumers.

Barely on the Tarmac, Obamacare is Poised to Crash.  ObamaCare's first 10 years of operations would cost $2.5 trillion.  This massive new expenditure, plus Washington's other spendaholic commitments, explains Obama's eagerness to jettison his oft-repeated commitment not to raise taxes on Americans who earn less than $250,000 annually.  To finance ObamaCare and their other pricey projects, many Washington Democrats crave a national sales tax.

Voters Do Not Want the VAT.  As the Obama Administration continues to float the possibility of enacting a Value Added Tax (VAT) as a solution to the growing deficit problem, polls show that such a national sales tax is widely unpopular with the American people.

News bulletin:
Voters don't want the income tax, either.

Obama's Debt Commission Will Consider a Value-Added Tax.  When President Obama asked former Sen. Alan Simpson (R-Wyo.) and Democrat Erskine Bowles to chair his debt commission in February, he told them to consider any and all ways to reduce the federal deficit — including new taxes, apparently.

EurObama.  VAT, first rolled out in 1950s France, is a sales tax on everything that every person or entity buys within a country, with exceptions or reductions carved out for things like food, newspapers, or various links along the industrial supply chain.  Compared to the H&R Block subsidy program that is the US tax code, the VAT is a straightforward way for governments to skim 20% or so off the top of every transaction.

The Silent Killer:  Obama's VAT Proposal.  When conservatives like Neal Boortz proposed the "fair tax" (a levy on consumption, not on income), we should have known that the Barack Obama left would seize on the proposal not as Boortz intended it to be — a replacement for the income tax — but as an addition to it.  Now Obama has let it be known that the value-added tax, or VAT, is "on the table" as he casts about for taxes to lock in his gigantic levels of federal spending.

The VAT's in the Fire.  When President Obama was a candidate, he pledged over and over to voters:  If you make less than $250,000 a year, your taxes will not go up.  Voters read his lips.  They hoped for change.  Yesterday [4/22/2010], the President said that the Value Added Tax is "on the table."  That means it will be the main course served up after the November elections.

The VAT Is Obama's License to Spend.  A value added tax is not just any old tax, it is a plague of potentially epic proportions.

Don't Give Obama a VAT.  In a nationally broadcast CNBC television interview on Wednesday [4/21/2010] with John Harwood of the New York Times, Obama said that a VAT would be "novel for the United States."  He repeatedly did not want to rule it out since he "wants to get a better picture of what our options are."  These are not the words of a President who is not considering a VAT, or who has ruled one out.  Rather, they are a clear and direct signal to anyone bothering to listen that a VAT is President Obama's preferred method of raising the taxes to pay for his massive expansion of government spending.

The Perils of Double Taxation.  We Americans believe we are overtaxed, as a Rasmussen poll revealed, as we focus on the accretion of direct taxes on income, payroll, products and services, and property.  Intimations of new taxes, like the value added tax (VAT), portend government's scrambling to find ways to access a citizen's wealth and income to fund its huge deficits.  It is the obscure double tax, though, that is insidiously harmful to the economy.

White House Dismisses Speculation Over National Sales Tax.  The White House pushed back Monday [4/19/2010] on a report that administration officials had examined the impact of a national sales tax as a way to help close the federal budget's gaping deficit.

U.S. eyes sales tax.  U.S. Sen. John Kerry said yesterday [4/8/2010] he favors exploring the possible implementation of a new nationwide sales tax similar to ones now imposed throughout Europe.  The issue of a new "value added tax" in the United States emerged earlier this week when Paul Volcker, an economic adviser to President Obama, said the U.S. may need such a tax to close the nation's long-term budget deficits.

Europe's VAT Lessons.  A VAT is essentially a national sales tax that is assessed at each stage of production, with the bill passed along to consumers at the cash register.  In Europe the average rate is a little under 20%.  In the U.S., a federal VAT would presumably be levied on top of state and local sales taxes that range as high as 10%.  Some nations also exempt food, medicine and certain other goods from the tax.

VAT chance.  After running up more than $3 trillion in debt in just two years, the federal government is looking for new ways to raise money.  Promised future entitlement spending in the tens of trillions of dollars has put the government's AAA bond rating in jeopardy, so borrowing all that money could be an expensive proposition.  That means a tax hike is coming.

Obama adviser Volcker says record deficits could lead to new VAT tax.  White House adviser Paul Volcker said the United States may need to consider raising taxes to control deficits.  He also said a European-style value-added tax could gain support.

The Editor says...
Heaven forbid that the Democrats should reduce spending.  No, their answer is always higher taxes.

The VAT Cometh.  As the night follows the day, the VAT cometh.  With the passage of Obamacare, creating a vast new middle-class entitlement, a national sales tax of the kind near-universal in Europe is inevitable.

VAT Would Be One Big Tub Of Trouble.  Ask a man on the street what VAT means.  After giving you a strange look, he'll probably give an answer along the lines of "a large tub."  In a way, he'd be right:  America's on-again, off-again move towards a Value Added Tax (VAT) is a metaphorical large tub, into which huge but nearly untraceable amounts of money will disappear.

VAT's The Matter?  At least twice a decade, it seems, desperate politicians latch on to the idea of a VAT as the best way to raise lots of money for their spending schemes.  No wonder.  Unlike our current system, a VAT would impose a uniform levy at each level of production, from raw materials to finished goods, so the revenue potential is huge.  Which is why it keeps coming up in our free-spending Capital.

Lied To Enough Already?  Individuals nationwide, regardless of political allegiance, have taken to the streets this year in opposition to the radical liberal agenda and assert that we're taxed enough already, but we should also recognize that liberals have lied to us enough already in regards to the further taxes we oppose.  House Speaker Nancy Pelosi (D-CA) continued her regularly scheduled display of dishonesty during a recent discussion of the value-added tax.

'Value-added tax' is an economy-killer.  The White House yesterday [4/7/2010] 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. ... 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.

Mrs. Pelosi's VAT.  Candor about taxes is rare in Washington, so when House Speaker Nancy Pelosi admits that Democrats may have to impose a huge new tax on the middle class to fund their spending ambitions, believe her.  Speaking with PBS's Charlie Rose on Monday [10/5/2009], Mrs. Pelosi mused publicly about the rising possibility of enacting a value-added tax, or VAT, as part of broader tax reform.  "Somewhere along the way, a value-added tax plays into this," she said.

The Editor says...
That's a national sales tax, in other words, on top of all our other taxes.

The First Hint of a European-Style VAT.  [Scroll down]  Now keep in mind, the addition of a VAT would be on top of our already overly burdensome federal tax system — meaning that you would continue to pay your federal income, payroll, capital gains, and estate taxes.  Don't be deceived into seeing this as a sister to the FairTax reform.  This is an entirely new accounting which will significantly increase the price of every good you buy.

VAT is a fix for spending addicts.  The political speedball would combine the quick rush of income tax increases with the euphoria induced by a value-added tax on consumption.  Tax increases typically produce a revenue spurt that quickly cools off as people find creative ways to evade them, while the VAT keeps taxing consumption at every stage from production to purchase of a product.  European VATs typically create substantial revenue streams, but stifle entrepreneurial energy and job creation.

Beware of a Value Added Tax.  The Heritage Foundation describes the VAT, already used in the European Union, as "similar to a national retail sales tax but is collected at every stage of business production until its entire burden ultimately falls on the consumer."  While the VAT could replace the income tax, which wouldn't be so bad in the eyes of many conservatives, the odds are overwhelming that under Obama it would be collected in addition to the income tax.

CBO Fielding VAT Questions From Congress.  White House advisor Paul Volcker made news this week by calling a value-added tax (VAT) "not as toxic an idea" as it's been in the past for tackling the nation's deficit problem.  Today, Congressional Budget Office Director Douglas Elmendorf confirmed he's been getting "a lot of questions" about the VAT tax from Congress.

The VAT Cat Is Out Of The Bag.  For months I have argued that Team Obama and the Democratic Congress were going to be forced to consider a VAT in order to pay for their extravagant spending.  Now borrowing almost 50 cents on every new dollar spent, the Democrats will at some point begin to deal with the politics of deficit reduction as a way of countering Republican criticisms about deficit expansion.  And the VAT's part of their answer.

Obama administration already laying groundwork for VAT.  According to the New York Times, the Obama administration's economic team is already running the numbers to prepare for the possibility of instituting a national value added tax.

If VAT, Ditch the Income Tax.  When liberals advocate a value-added tax, conservatives should respond: Taxing consumption has merits, so we will consider it -- after the 16th Amendment is repealed.  A VAT will be rationalized as necessary to restore fiscal equilibrium. But without ending the income tax, a VAT would be just a gargantuan instrument for further subjugating Americans to government.

Ouch - VAT hurts.  Struggling Brits are being hit with a triple whammy — a painful VAT increase along with huge rises in train fares and petrol prices. ... Inflation-busting increases in rail and Tube fares took effect yesterday [1/2/2011], with some tickets up by 13 per cent.  Petrol is already at a record average of £1.24 a litre after a rise in fuel duty on New Year's Day — with a further 7p duty increase due in April.

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Updated March 23, 2019.

©2019 by Andrew K. Dart