Sunday, December 12, 2010

VAT The Heck?

I hope everyone had a wonderful Thanksgiving, filled with love, gratefulness and of course food. My family had dinner early, so around 5pm, after watching football most of the day, I sat down with a slice of pumpkin pie and watched the evening news. I then heard something that made me bite my tongue; Looks like the administration is once again looking at creating a National sales tax. Damn, I knew it! I thought this crap went away a few years ago, soon after President Obama took office, but no, here we go again.
Folks, a couple of years back this national sales tax was and still is known as the value added tax, or, V.A.T. what is V.A.T? Here is one definition:

A V.A.T is a national sales tax that would be collected by retailers. But it can also be imposed on products as they make their way through the manufacturing process. That is, manufactures, producers and business that add value to the product as well as by the consumer pay the tax for a single product.

The administration dangles the carrot to the American people by saying the V.A.T will eliminate the income tax. Hell, on the surface it sounds good. No more income tax, sign me up! Remember people, the devil’s in the details. President Obama is vetting a V.A.T to extract more wealth from the private sector to sustain this insatiable hunger for more government spending. Earlier this year, Fed chairman Ben Bernanke commenced a vetting strategy to convince Americans that they may have to choose between higher taxes or massive cuts to Government programs such as social security, Medicare, Education and Defense. This is essentially fear mongering, and a false choice. The Government needs to reform entitlement programs, needs to root out waste, fraud and abuse.
The reason why elites in Washington look at a V.A.T before increasing income taxes is because not enough of the population even pays income taxes, to make it worthwhile for the Government to use the income tax structure to balance the budget. According to the tax policy center, only about 47% of Americans will pay no federal income taxes at all. Meanwhile the Government can extract the most amount of your wealth, from a national sales tax. Think about this, 47% of Americans will pay no income tax. 100% of Americans will buy many things throughout the year. Let’s say the V.A.T is 20% (by the way, this is on top of all the other State, local taxes you already pay) that’s a 20% V.A.T on consumers of anything you buy. After speaking with some folks about this, here are some of the pros and cons:

Pro- It would eliminate the income tax. All taxes would be collected by retail businesses as they sell goods and service

Con- Income taxes are evil, however I don’t want to be taxed to death every time I buy something at the store or buy a gift for a friend

Pro- It would tax all citizens at the same rate so that only those who spent more would pay more taxes
Con- A V.A.T is essentially a tax on consumption. Since low income families spend almost every penny they earn on subsistence items, they would pay a higher percent of their earnings in taxes.

To me, I say no way. A national sales tax would be the end of economic freedom as we know it, because the federal government would then have the power to tax all aspects of our lives. Until Washington can restrain spending, we should not entrust it with the power to create a brand new tax.

My question for you, is the national sales tax the fairest plan? What do you think of a V.A.T being imposed on consumer goods?
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-Until next time, Rodney

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