Kill the VAT Now and Forever

Kill the VAT Now and Forever
Bruce Bialosky
Sunday, June 28, 2009

The current rage amongst the intellectual elite is that we should join our European friends and put in place a national sales tax, commonly referred to as a Valued Added Tax (VAT). If we adopt this form of taxation, you might as well prepare for the death knell of both our economy and our freedom.

It should be noted that some smart people are in favor of this tax form and they have good arguments. A few years back, I saw Arthur Laffer give a speech to the California Republican Party where he whole-heartedly endorsed the VAT. If you are not familiar with him, Dr. Laffer is the creator of the Laffer curve and quite a brilliant man. He is also a wonderfully nice and personable man, especially noteworthy for an economist most of whom can be duller than the typical CPA.

When I went up to him, I told him he was dead wrong about the VAT. Instead of blowing me off, this internationally-known economist said he would love to hear my thoughts. What ensued was a series of correspondence between him and me. Laffer sent me these wonderful letters with charts and graphs explaining why the VAT made sense. There were arrows and square root symbols flying all over the place. I in turn sent him my thoughts. Despite the fact he is a lot smarter than I am, he was wrong and I was right.

The major issue is that the VAT is an invisible tax. You never see it. The rate can be adjusted and you would only blame retailers for the increased prices. Think of gasoline taxes. If you stand around the pump and asked people about the cost of gas, they would say things about oil companies which make their mothers want to get the nearest bar of soap. But if you state that the government is making a lot more on a gallon of gas than the oil company is, they are clueless. The oil company even posts signs on the pump delineating the taxes, but people ignore them.

Review your phone bill and see how you are getting raped. And this is not even a totally invisible tax. It sits in front of your face and most people don’t even see it. The VAT is totally invisible. You never see it directly in your cost unless you collect it. Therefore, it can be easily manipulated. For instance, the rate in Denmark has gradually been raised from 9% at its inception in 1962 until today where it is 25%.

Yet the Danes love it because when they go to restaurant, they pay the price on the menu for their meal. Included is the tax plus the service. In the U.S. the sales tax slaps you in the face and then you have the choice of what you may additionally leave for service (tip) based on the waiter’s performance. This is the difference between a socialist society where decisions are being made for you and a free society where you make your own decisions.

Every tax revolt in this society has been over transparent taxes. The two taxes most rebelled against are auto license fees and property taxes. The reason is simple: people write a check for these taxes and know how much they are paying. When they know how much they are paying, people realize they are not getting what they are paying for in taxes. Why don’t people revolt against income taxes more? The answer is also very simple. Most have their taxes withheld from their paycheck. The ones who really get upset are the ones who write quarterly checks. Unfortunately, when it comes to filing their taxes, even the smartest people don’t ask how much they are paying in taxes. They ask whether they have a refund coming. When that question is asked, you know that the taxman has them under his boot.

Dr. Laffer accepted this argument that in my mind is good enough to stick a knife through this evil incarnate. The biggest problem with Dr. Laffer’s arguments is that he wants to replace the income tax system with VAT. That will never happen. The crowd who wants to put this in place wants this to supplement the current income tax system with the VAT. They promise a reduction in other taxes, but do you trust Harry Reid and Nancy Pelosi when they tell you that? Enough said there.

Lastly, you have to understand where this tax comes from to understand why it is so bad. First, it was invented by a Frenchman, Maurice Laure. Not everything the French have every done is bad. After all, there was Louis Pasteur and Lafayette. But do you see the French as a model for running a government? The Nordic states love it, but they are all on the edge of socialism and choice has gone out the window in those countries.

The big promoter of the VAT these days is Ezekiel Emanuel, brother of President Obama’s political henchman, Rahm Emanuel. Just what the world needs right now is another Emanuel fishing for our money. This Emanuel is a bioethicist who is advising Obama on nationalizing our health care system. He states he wants the VAT so they can have more revenue to pay for the health care system that needs all that new money that Obama will not be saving by nationalizing our health care.

The more taxes are transparent, the less people are willing to have their freedom taken away by having their money taken away. Politicians like invisible taxes which you don’t see or write a check for; thus they are not bothersome. The VAT would not replace our income tax system; it would just give more of our money to the power freaks in Washington. Kill this ugly tax before it gets off the ground and throws our economy into a tailspin.

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