VAT Tax Ends the Consumer Economy

Are you ready for the end of the consumer economy? Well, your voice needs to sound loud and clear if you want to save the last remnants of a middle class existence. Forget about upward mobility or affluence, the basic elements of a respectable life is being targeted for extinction. That is the stark and certain consequence of a VAT Tax. Just look to Europe for the beleaguered life aftermath of this incremental method of extracting additional tribute on every level of production and distribution. Everyone must oppose this overt attempt to impoverish Middle America, unless your goal is to break the back of consumers and lower permanently the standard of living of our country.

The recent trial balloon to place a VAT on the table for a new additional tax is indefensible. Note the notion of comprehensive tax reform is seldom heard in the managed media. The idea of replacing the income tax with a consumption levy would be a legitimate debate. However, all you hear is that the government needs more revenue to offset historic deficits. Please! Who among us with command of their mental faculties believe that bleeding the public more will stop the political class from spending even more money?

The Tax Foundation’s Nick Kasprak reports on the Value-Added Tax (VAT) included in the Bipartisan Policy Center’s deficit reduction proposal:

"The plan from the BPC Debt Reduction task force, headed by former CBO director Alice Rivlin and former Senator Pete Domenici (R-NM) would cut federal spending in many areas, and would dramatically simplify the federal income tax by lowering rates, eliminating most itemized deductions and replacing others with simplified tax credits, and reducing the number of income tax brackets. In what is sure to be a controversial proposal, the plan calls for making up some of this lost revenue by imposing what it calls a "Deficit Reduction Sales Tax" – in other words, a national sales tax imposed on top of existing state and local sales taxes. To combat tax evasion, it is likely that the tax would take the form of a Value-Added Tax, or VAT- a system where a portion of the sales tax is collected at each stage of production, rather than all at the final sale.
According to the document released by BPC, the VAT would be phased in over two years, beginning with a 3% rate in 2012 and a 6.5% rate for 2013 and beyond. BPC states that this would raise $3,048 billion dollars from 2012 to 2020; according to some quick calculations, I estimate that the tax base for the VAT would have to be approximately 29% of GDP – this assumes the BPC rates are tax-exclusive (the standard for sales taxes) and no tax evasion".

Up to this point, the Deficit Commission ignores the VAT in their proposal. "Both co-chairs of the bipartisan commission had floated the idea of recommending a VAT prior to the final report being released. In the end, however, they chose to simply tweak the already convoluted tax code". Proponents for a VAT like Michael Graetz, a Yale University law professor, spin the yarn that "such a plan would lower taxes for each and every tax bracket and could allow taxpayers to exempt their first $100,000 from income taxes each year". Only in an ivory tower would such naivety be considered as a serious possibility, when tax legislation emerges from the sausage grinder.

Holding the wolves at bay before they knock down the door is a matter of time. After the next financial implosion, the bubble of bad debt will look to a VAT as easy tax money. Forget about reductions in IRS taxes. The deductions will evaporate while the obligations expand. This is the history of government extortion.

The reason that spending cuts are seldom even whispered is that professional political criminals want respect (from their den of thieves). They know that the dumbed down public is stupid but not completely ignorant. The federal government consortium takes your earned wealth and only dispenses conditional hand-outs. So what will happen to jobs and economic growth? A VAT will shut down consumer spending for all but the most basic of survival goods and services.

This bleak outlook would take a toll on all retailers, credit card banking and every level of manufacturing. The push back will come from the usual usurpers. Wal-Mart would demand an exemption, their Chinese suppliers would require a rebate and Visa and Master Card will jack up service fees to offset the loss in volume. The burden from an economic system of selective enforcement will result in Main Street closing the few remaining merchant shops still in business.

The Cato Institute explains the dangers of a VAT Tax that impairs the economy. Watch the video - A Hidden New Tax to Finance Much Bigger Government.

Jim Powell argues in Investor’s Business Daily,

"Supposedly a value-added tax is a magic elixir for curing budget deficits and excessive debt. Quack remedy would be more like it. If it worked, you’d observe that countries with a VAT had budget surpluses and no debt problems. But almost every country that has a VAT is plagued with budget deficits and excessive debt. … No surprise that the worst financial basket cases all have a VAT. Iceland has the highest VAT rates, but this didn’t prevent its financial crisis and the near bankruptcy of its government. Italy’s VAT rates are almost as high, and its debt exceeds its GDP. Financial crises are looming in Spain and Portugal, and of course they have a VAT. Greece has a VAT, too, and when politicians ran out of money to pay government employees for more than a year’s worth of work every year, they rioted in the streets. Great Britain has a VAT, and its government finances are in the worst shape since World War II — its budget deficit is expected to be bigger than that of Greece. Moreover, the OECD has acknowledged that "(VAT) tax and transfer wedges have discouraged firms from offering employment and individuals from taking it, reduced employment and increased inequality."

In a rush for additional revenues, the Federal Government is poised to slam another stick up the derrière of the public. Don’t be fooled with the claims that a VAT Tax will replace the oppression of the income tax. When interest rates inevitably rise because government bonds will not sell without a higher return, the cries will become deafening that only additional revenue will forestall default. The Socialism of Europe becomes complete with the integration of America into the central controlled managed economy.

The consumer is absent from their excessive spending since the meltdown of 2008. Attempts of debt-ridden consumers to clean up their personal balance sheets are laudable. However, a VAT will just slow that process and will create a disincentive to resume future purchases.

This result is not all bad. No doubt, families would be better off with a rejection of an impulse consumer society. But can the domestic based manufacturers survive another drop in sales? The consumer culture will not die easily. The denial mindset of most customers resists the pain from hitting the brick wall that blocks their spending. The thrill of racking up the Black Friday Holiday sales has a new twist – Thanksgiving Day open store hours. Will a VAT stop this drive for immediate satisfaction or will this tax just hasten the wait to process your bankruptcy filing?

National wealth is sinking and most people are hurting. The top echelon of corporate bosses, political patrons and financial crooks are running the real economy into the ground. The bereaved consumers dug their own hole. However, they had a lot of help from the likes of Bank of America. An additional tax from a VAT on top of all the service fees, tariffs and duties invariably widens the gap between the penniless and the billionaires. How likely is it that you will leap into the jet set or is it more probable that you will be joining the indigent class?

Taxes are universally destructive when governments waste the revenue on obscene and destructive causes and programs. A proposed VAT is the next insult. How much more will you take? Your standard of living is vanishing before your eyes. If a burglar broke into your home to steal your money, your best friend would be a 357 magnum. Not so, for "Pavlovian" trained serfs! They willing accept being cast into a vat of boiling oil with not so much as a whimper. What kind of American are you? One who obeys orders and walks through the full radiated body scanner or do you have the courage to draw the line of having your genitals fondled? Even a TSA full body cavity search is temporary, you can refuse to fly, however; a VAT Tax will be a permanent invasion and assault on your wealth. The choice is yours, be a dog and submit, or resist, if you have the balls.

SARTRE – November 21, 2010