(Via Real Clear Politics)Like It or Not, VAT's in Your Future
Conservatives don't like it, nor do liberals. No one loves the value-added tax, but the VAT is looking better all the time. Expect to hear more nice things said about it in the months to come.
A VAT is basically a national sales tax. America doesn't have a VAT. European countries do, and they're not shy about letting it rip. Britain charges a 17.5-percent VAT on everything people buy. In Denmark and Sweden, the VAT is 25 percent!
Conservatives don't like the VAT because it's a politically easy way to raise taxes. And it greases the skids for big government programs. Europeans will be the first to tell you that their sales taxes are how they pay for universal health care, lush unemployment benefits and the rest of the dolce vita.
On the other hand, a VAT takes pressure off the income tax -- a tax that most conservatives hate like no other. It taxes consumption only and doesn't penalize investments. Some conservative reformers want to completely replace the income tax with a VAT.
Liberals don't like the VAT because the poor spend a bigger percentage of their income than do the rich -- so more of their income gets taxed. (However, the rich do tend to buy more stuff overall.) Furthermore, everyone gets taxed at the same rate: In Italy, the seamstress and the corporate lawyer pay the same $20 sales tax on a $100 baby carriage.
On the other hand, the VAT makes possible the generous government programs that benefit seamstresses more than attorneys. And it helps achieve other societal goals. For example, environmentalists who want high gas taxes to discourage fossil-fuel consumption need only wait for a European-style VAT.
Another thing: The income tax is rigged against ordinary people. Working stiffs have the income tax ripped every week out of their paychecks. Our Byzantine tax code lets rich people play with the numbers. Guided by daring accountants, business owners and investors can do creative things to lower their declared income and thus avoid paying income taxes. But they can't escape the VAT. When they buy their Learjet, Mercedes CL600 or Chanel suit, the VAT will catch 'em.
The trouble is it is possible to come up with good reason not to like just about any kind of taxation someone might propose. I, for example, have an almost pathological hatred of property taxes, which, to my way of thinking, only functions to keep real property from being held by those folks with lower incomes. Similar types of objections can be raised about sales taxes and income taxes as well. It should be clear that in a country with diverse opinions on such matters there will never be a single satisfactory answer. There is always going to be something to dislike about the way we fund the federal government.
That being the case, why can't we take a more balanced approach? I would support a system that lowered (and simplified) federal income tax rates, while at the same time instituting a modest VAT. Such an approach would spread the inequalities more evenly across the board, at least theoretically.
The experiences of states like Washington and Oregon clearly show that you don't want governments too dependant on sales taxes for their revenue streams. Citizens should be able to expect some consistency of governmental services without the prospect of them going broke during the inevitable economic downturns. So I certainly wouldn't want to replace the income tax with the VAT.
The trouble is that there are those in congress that act as if the current tax laws were brought down the mountain on stone tablets. They should be reminded that the tax code is not sacrosanct. It exists to serve our needs, not the other way around.
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