Posts Tagged ‘VAT’

Thoughts on a WSJ article called “Europe’s VAT Lessons” printed on April 15, 2010

Many Americans have no idea what a Value Add Tax is or what it does.  VAT is a tax at each stage of production that is passed along to the end purchaser or the product.  For example lets say that Q-Tips go through 5 stages of production.  Each one of those 5 stages is taxed and passed along to the end purchaser of the product as a VAT.  Lets say that a box of Q-Tips currently cost $1.98 and for each of the five stages of production a 2 cent tax is added for a total of 10 cents.  This will bring the cost of your box of Q-Tips to $2.08 or a 5% increase before you pay sales tax at the register.   With a VAT being levied on top of your Federal, State, & Local taxes the cost of everything you buy or do will be increased.  The VAT will essentially become a national sales tax on top of all the other taxes that we pay today. 

The VAT is a creation of Europe to fund their huge entitlement states.  The problem is that everywhere this is tried the tax starts small and continues to grow while none of the taxes already in place are taken away. 

Now let me be clear if a VAT was to replace the income taxes already on the books we could talk about it.  But that’s just not the case.  A higher tax burden will also mean lower levels of income growth for the United States citizen.  This is put into perspective by the last two paragraphs of the Wall Street Journal Article

And one more point: In Europe, this heavier spending and tax burden has also meant lower levels of income growth and job creation. From 1982 to 2007, the U.S. created 45 million new jobs, compared to fewer than 10 million in Europe, and U.S. economic growth was more than one-third faster over the last two decades, according to the Bureau of Labor Statistics.

In 2008, the average resident of West Virginia, one of the poorest American states, had an income $2,000 a year higher than the average resident of the European Union, according to economist Mark Perry of the University of Michigan, Flint. The price of a much higher tax burden to finance a cradle-to-grave entitlement state in Europe has been a lower standard of living. VAT supporters should explain why the same won’t be true in America.

Now don’t take me wrong I love my home state of WV but can you imaging that hat a typical WV income being a higher standard of living for you?  All a VAT will do is send more money to Washington that will just be used for the pet projects.  It will never be used to pay down the debt, sure up Social Security, or Medicare it will just be spent.  Health Care is through and will be hopefully repealed or struck down.  The VAT cannot be allowed to clear congress stay alert people stay alert.