We all have an important decision to make. We’re going to have to decide how Americans will continue to determine what’s fair. We’re going to have to decide if we reward people based on their initiative and determination, or if we reward them on their connections, and their ability to manipulate the system. Those are the choices… there is no third way. In the end it won’t be a little from one and a little from the other.
Charles Krauthammer thinks a VAT is coming, and if Obama has his way … he’s absolutely right. And if we allow the government to adopt one, we take our first steps into a world where all the winners and losers are determined in Washington. As it stands we still have a system based at least partly on merit. But if we choose to go down this road... those days will soon be behind us. We'll be appointing Washington the final arbiter of every economic act performed by anyone in the country.
The VAT is a great thing for those collecting it but a terrible thing for those who are paying it because it’s basically impossible to tell how much tax you’re paying. In short, it’s a tax on the act of production. Whatever you do, anywhere in the product supply chain, any act that adds value to an item is taxed and it’s cost incorporated to the products you sell. No one ever sees the tax directly. All you ever see are much higher prices. And its that obfuscation that makes it the perfect tax for politicians because they can raise it at will with no one really seeing any direct effect.
In fact, it gives politicians a terrifying precise way to micromanage economic growth. They can pick virtually all the winners and losers; almost down to the man. It won’t be sold that way of course… it will start out as a very small percentage with the actual number chosen by a focus group to make it palatable. If it’s .1% at first then that’s fine… so long as the door is opened. Because next year congress can go back and raise it, and they can raise it again the year after that...and every year after for that matter. The increase will be spread equally across our entire economy so it won’t be felt directly. That’s the true beauty of a broad based tax. Gobs of money will flow into the government and all the costs will be indirect. Congress can continue to raise it until the entire country is at capacity taxation. At that point every increase in tax results in an equivalent reduction in growth and employment. We become a country with a parasite so large that no matter how hard we work we cannot grow at all. Then the truly insidious action begins.
with slower Economic growth and European levels of unemployment, people will demand action from Congress and they will respond with VAT "Tax Credits". But unlike a tax cut, a tax credit means that they get to decide who gets what and when. Take the old example of Milton Friedman’s pencil. They can give a 1% tax credit to the wood pulp people, and a 2% credit to the rubber manufacturers because the latter are all in Democrat districts. Nothing for the graphite people because they're all in a Red state. Eventually all earmarks will come in that form. Congress can focus the credits on whoever they like and for whatever reason. They can custom pick and choose who wins and who loses every time any economic activity takes place. It will place the people in congress in the center of the board negotiating every deal and controlling every outcome. In short it will put them all right where they believe they should have been all along… controlling every aspect of every one of our lives.
Thanks to the tax and spend policies of our government we face a truly grim economic future. But the VAT is not a way out for anyone but them. Without it, we face either substantial cuts in entitlements, or the potential collapse of the government. But if we allow them to implement a VAT, the government may survive but the country and its character, almost certainly will not. Our elected officials cannot be trusted to behave responsibly with public finances, and giving them a new source of income will make matters worse not better.
Obamacare taught us that we are no longer a people ruled by the consent of the governed. We are now a client people with our masters in Washington, commanding us as they see fit. If we let them establish a Value Added Tax, then we give them the final tool they need to dominate us completely. It will make us a society of 2 classes… those that make … and those that take it from them and decide who receives it. And if you ask me that's no longer the America that I know.
A Personal Note:
I'm off to Florida next week so I won't be around much. We're at Disney for a few days then a week or so with my Father in law. See you all when I get back.
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