A sad time for America

[sirs]

Obamacare's next trick: the VAT
 
[size=pt]By Charles Krauthammer
Friday, March 26, 2010[/size]

As the night follows the day, VAT follows health-care reform.

With the passage of Obamacare, creating a vast new middle-class entitlement, a national sales tax of the kind near-universal in Europe is inevitable.

We are now $8 trillion in debt. The Congressional Budget Office projects that $12 trillion will be added over the next decade. Obamacare, when stripped of its budgetary gimmicks -- the unfunded $200 billion-plus "doctor fix," the double counting of Medicare cuts, the 10-6 sleight-of-hand (counting 10 years of revenue and only six years of outflows) -- is at minimum a $2 trillion new entitlement.

It will vastly increase the debt. But even if it were revenue-neutral, Obamacare preempts and appropriates for itself the best and easiest means of reducing the existing deficit. Obamacare's $500 billion of cuts in Medicare and $600 billion in tax hikes are no longer available for deficit reduction. They are siphoned off for the new entitlement of insuring the uninsured.

This is fiscally disastrous because, as President Obama himself explained last year in unveiling his grand transformational policies, our unsustainable fiscal path requires control of entitlement spending, the most ruinous of which is out-of-control health-care costs.

Obamacare was sold on the premise that, as Nancy Pelosi put it, "health-care reform is entitlement reform. Our budget cannot take this upward spiral of cost." But the bill enacted on Tuesday accelerates the spiral: It radically expands Medicaid (adding 15 million recipients/dependents) and shamelessly raids Medicare by spending on a new entitlement the $500 billion in cuts and the yield from the Medicare tax hikes.

Obama knows that the debt bomb is looming, that Moody's is warning that the Treasury's AAA rating is in jeopardy, that we are headed for a run on the dollar and/or hyperinflation if nothing is done.

Hence his deficit-reduction commission. It will report (surprise!) after the November elections.

What will it recommend? What can it recommend? Sure, Social Security can be trimmed by raising the retirement age, introducing means testing and changing the indexing formula from wage growth to price inflation.

But this won't be nearly enough. As Obama has repeatedly insisted, the real money is in health-care costs -- which are locked in place by the new Obamacare mandates.

That's where the value-added tax comes in. For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude -- if you exempt food, for example, the yield would be more like $900 billion).

It's the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs.
Germany: 19 percent.
France and Italy: 20 percent.
Most of Scandinavia: 25 percent.

American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.

Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama's triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan's strategy was to starve the (governmental) beast in order to shrink it: First, cut taxes -- then ultimately you have to reduce government spending.

Obama's strategy is exactly the opposite:
Expand the beast and then feed it.
Spend first -- which then forces taxation.
Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.

And the VAT is the only trough in creation large enough.

As a substitute for the income tax, the VAT would be a splendid idea. Taxing consumption makes infinitely more sense than taxing work. But to feed the liberal social-democratic project, the VAT must be added on top of the income tax.

Ultimately, even that won't be enough. As the population ages and health care becomes increasingly expensive, the only way to avoid fiscal ruin (as Britain, for example, has discovered) is health-care rationing.

It will take a while to break the American populace to that idea. In the meantime, get ready for the VAT. Or start fighting it.


"VAT's all folks"

[sirs]

U.S. business could be cooked in a VAT

May I be boring? Or, if you're a regular reader, more boring than usual?

Bear with me. There's some eye-glazing numbers and whatnot.

In 2003, Washington blessed a grateful citizenry with the Medicare prescription drug benefit, it being generally agreed by all the experts that it was unfair to force seniors to choose between their monthly trip to Rite-Aid and Tony Danza in dinner theater. However, in order to discourage American businesses from immediately dumping all their drug plans for retirees, Congress gave them a modest tax break equivalent to 28 percent of the cost of the plan.

Fast forward to the dawn of the Obamacare utopia. In one of a bazillion little clauses in a 2,000-page bill your legislators didn't bother reading (because, as Congressman Conyers explained, he wouldn't understand it even if he did), Congress voted to subject the 28 percent tax benefit to the regular good ol' American-as-apple-pie corporate tax rate of 35 percent.

For the purposes of comparison, Sweden's corporate tax rate is 26.3 percent, and Ireland's is 12.5 percent. But just because America already has the highest corporate tax in the OECD is no reason why we can't keep going until it's double Sweden's and quadruple Ireland's. I refer you to the decision last year by the doughnut chain Tim Hortons, a Delaware corporation, to reorganize itself as a Canadian corporation "in order to take advantage of Canadian tax rates."

Hold that thought: "In order to take advantage of Canadian tax rates" ? a phrase hitherto unknown to American English outside the most fantastical futuristic science fiction.

Ask yourself this: If you impose a sudden 35 percent tax on something, are you likely to get as much of it? Go on, take a wild guess. On the day President Barack Obama signed Obamacare into law, Verizon sent an e-mail to all its employees, warning that the company's costs "will increase in the short term." And in the medium term? Well, U.S. corporations that are able to do so will get out of their prescription drugs plans and toss their retirees onto the Medicare pile. So far just three companies ? Deere, Caterpillar and Valero Energy ? have calculated that the loss of the deduction will add a combined $265 million to their costs. There are an additional 3,500 businesses presently claiming the break. The cost to taxpayers of that 28 percent benefit is about $665 per person. The cost to taxpayers of equivalent Medicare coverage is about $1,200 per person.

So we're roughly doubling the cost of covering an estimated 5 million retirees.

Now admittedly the above scenario has not been, as they say, officially "scored" by the Congressional Budget Office, by comparison with whom Little Orphan Annie singing "The Sun'll Come Out Tomorrow" sounds like Morrisey covering "Gloomy Sunday." Incidentally, has the CBO ever run the numbers for projected savings if the entire CBO were laid off and replaced by a children's magician with an assistant in spangled tights from whose cleavage he plucked entirely random numbers? Just a thought.

This single component of "health" "care" "reform" neatly encompasses all the broader trends about where we're headed ? not just in terms of increased costs (both to businesses and individual taxpayers) and worse care (for those retirees bounced from company plans into Medicare), but also in the remorseless governmentalization of American life and the disincentivization of the private sector. As we see, even the very modest attempts made by Congress to constrain the 2003 prescription drug plan prove unable to prevent its expansion and metastasization. The one thing that can be said for certain is that, whatever claims are made for Obamacare, it will lead to more people depending on government for their health arrangements. Those 5 million retirees are only the advance guard. And, if you're one of those optimistic souls whose confidence in the CBO is unbounded, let's meet up in three years' time and see who was correct ? the bureaucrats passing out the federal happy juice, or the real businesses already making real business decisions about Obamacare.

Can we afford this? No.

Even on the official numbers, we're projected to add to the existing $8 trillion in debt another $12 trillion over the next decade. What could we do? Tax those big bad corporations a bit more?

Medtronic has just announced that the new Obamacare taxes on its products could force it to lay off 1,000 workers. What do those guys do? Well, they develop products such as the recently approved pacemaker that's safe for MRI scans or the InterStim bladder control device. So that's a thousand fewer people who'll be working on new stuff. Well, so what? The public won't miss what they never knew they had. So, again, the effect is one of disincentivization ? in this case, of innovation.

If existing tax structures can't cover the costs, what can we do? Start a new tax! The VATman cometh. VAT is Euro-speak for "value added tax."

Americans often carelessly assume it's merely a sales tax, but, in fact, it's far more cumbersome than that, being levied at each stage that "value" is added to a product or service. The consumer can't claim back the VAT, but intermediate businesses in the production chain can. So self-employed individuals with relatively modest income wind up both charging VAT to their clients (25 percent in Scandinavia) and then claiming back the VAT they spent on the stamp and stationery they used to mail out the invoice. This is yet another imposition on businesses, taking time away from wealth creation and reallocating it to government paperwork. If the Democrats hold Congress this fall, I would figure on VAT sooner rather than later.

All of the above is pretty much a safe bet. What about the imponderables?
Even Obama hasn't yet asked the CBO to cost out, say, what happens to the price of oil when the Straits of Hormuz are under a de facto Iranian nuclear umbrella ? as they will be soon, because the former global hyperpower, which now gets mad over a few hundred housing units in Jerusalem, is blas? and insouciant about the wilder shores of the mullahs' dreams.
Or suppose, as seems to be happening, the Sino-Iranian alliance were to result in a reorientation of global oil relationships, or the Russo-Iranian friendship bloomed to such a degree that, between Moscow's control of Europe's gas supply and Tehran's new role as Middle Eastern superpower, the economy of the entire developed world becomes dependent on an alliance profoundly hostile to it.

Which is to say that right now the future lies somewhere between the certainty of decline and the probability of catastrophe. What can stop it? Not a lot. But now that your "pro-life" Democratic congressman has sold out, you might want to quit calling Washington and try your state capital. If the Commerce Clause can legitimize the "individual mandate," then there is no republic, not in any meaningful sense. If you don't like the sound of that, maybe it's time for a constitutional convention.


The VATman cometh

[sirs]

And as predicted:

Volcker: Taxes likely to rise eventually to tame deficit

NEW YORK Tue Apr 6, 2010
NEW YORK (Reuters) - The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.

Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax "was not as toxic an idea" as it has been in the past and also said a carbon or other energy-related tax may become necessary.

Though he acknowledged that both were still unpopular ideas, he said getting entitlement costs and the U.S. budget deficit under control may require such moves. "If at the end of the day we need to raise taxes, we should raise taxes," he said.


Saw this one coming too

[Plane]

European Contries have has VAT for a long time.

Do they love it?

[Xavier_Onassis]

It is safe to say that no one loves taxes. But the Europeans have democratic countries and can repeal taxes as well.
They love the benefits of the taxes more than the hate paying for the taxes.

[Henny]

It is safe to say that no one loves taxes. But the Europeans have democratic countries and can repeal taxes as well.
They love the benefits of the taxes more than the hate paying for the taxes.

Agreed, XO.

[sirs]

Good thing we have a Democracy as well.  Can't wait til Nov when the people let the politicians know just how much they "love the benefits of the taxes"

[sirs]

A little op-ed for messers X0, Miss Henny, and like minds who think we're just not properly embracing the goodness of more taxes
--------------------------------------------------------------
Congratulations! This is your last week working for the man -- at least for this year. The Tax Foundation calculates that Tax Freedom Day for 2010 is April 9, which means that by Friday, Americans will have spent nearly 100 days working just to pay their taxes. If Democrats have their way, Tax Freedom Day will keep getting later and later.

Hold that thought. Imagine for a moment that Tax Freedom Day was Dec. 31. In other words, picture working 365 days a year for the government. Now, the government would "give" you a place to sleep, food to eat and clothes to wear, but all your income would really be Washington's income to allocate as it saw fit. Some romantics might call this sort of arrangement "socialism" or "communism." But another perfectly good word for it is "slavery," or, if you prefer, involuntary servitude.

No one is proposing any such arrangement. But it's an important point conceptually. A 100 percent tax rate would be tyrannical not just because you have a right to own what you create, but because the government would necessarily decide what you can and can't have. Reasonable people can of course differ about where a tax rate becomes tyrannical, and we're far from that line in historical terms. But any amount of taxation can be unjust if it is being used for bad reasons, is applied discriminatorily or if it's taken without representation. (That's how the American Revolution started, after all.)

Individual liberty is far from the only concern, either. The kind of country we want to be is deeply bound up in taxation. The Tax Foundation estimates that some 60 percent of American families already get more from the government than they pay in taxes (and the top 10 percent of earners pay more than 70 percent of the income taxes).

If all of President Obama's plans are enacted, that percentage will increase. We are heading toward being a country where instead of the people deciding how much money the government should have, the government decides how much money the people should have.

Only after they passed "ObamaCare" did Democrats clarify that this was one of their motives. ObamaCare's appeal has less to do with saving money -- which it won't do -- and more to do with spreading the wealth around. Senate Finance Committee Chairman Max Baucus, D-Mont., recently admitted that alleviating the "maldistribution of income in America" from the haves to the have-nots is one of the legislation's real benefits.

Of course, this will fuel the national debt, which has soared on both parties' watches ($12 trillion now and heading for $20 trillion in a decade), choking liberty in another way. We are levying tax obligations for generations to come. Our grandchildren didn't have much representation in that taxation.

There's also the simple fact that taxes impede growth, and low economic growth curtails the pursuit of happiness for everyone. Democrats are increasingly skeptical about this transcendently obvious point because they have convinced themselves that since government is better than the private sector when it comes to spending money wisely, it only makes sense to take money from the dumb private sector and let the smart government sector decide what to do with it.

Well, no matter how dumb America's wealth-creators might be, they're smart enough to respond to incentives and disincentives. Indeed, since 1950, no matter where their tax rates have been, from as low as 28 percent to as high as 91 percent, the government's take has held at about 19.5 percent of GDP, suggesting that squeezing taxpayers harder doesn't necessarily yield more juice.

Personally, I have never understood liberalism's blind spot for liberty when it comes to taxation. A 24-hour waiting period before a teenager can have an abortion is an allegedly grotesque violation of individual freedom, but a federal government that takes vast amounts of your money -- the means by which you exercise your every freedom -- to distribute as it sees fit is "progressive"? The USA Patriot Act, whose threat to privacy was somewhere between entirely theoretical and nonexistent for the overwhelming majority of Americans, shocked the liberal conscience. But our income tax system -- made idiotically complex by both parties -- that demands countless hours of preparation and requires law-abiding citizens to reveal (and document!) many of their most private decisions to government inspectors every year is "reasonable." Yet many liberals even think complaining about this is a sign of right-wing dementia.

Now, under ObamaCare, the IRS is going to branch out into the field of health care, enforcing mandates and collecting fees. Perhaps it's not entirely paranoid to fear that this will make the IRS's past intrusions of proctological exactitude even less metaphorical.

I bring this up because many in the Democratic Party and in the news media have a hard time understanding what the "Tea Party" crowd is talking about when it complains of incipient tyranny and intrusive government. This might be why much of the media keep making up motives for the tea partiers rather than taking them at their word (as when a CNN reporter told viewers that the tea parties were driven by "anti-CNN" passions). Again, reasonable people can disagree with where the line between necessary taxation and injustice lies. But the line exists. Tax Freedom Day is going to come later and later, no matter what. Maybe we should figure out now where on the calendar we should mark down that line.


Can't wait until Nov

[sirs]

 
Would A National Sales Tax Be Used To Fund Obamacare?  
Posted by: Jillian Bandes
Wednesday, April 14, 2010

Obama's widely-criticized debt commission is considering a Value Added Tax to tackle the mounting national debt. That's a code word for a national sales tax. But instead of axing other taxes to implement this new one, they just want to pile it on top of the others.

Here are wise words from Dan Mitchell's recent editorial:

Observers suspect that President Obama's deficit reduction commission will recommend the VAT to counter the administration's spending addiction; the only tool many economists believe is capable of raising enough money to make a dent in the gargantuan Obama deficit.

...Simply stated, there's no way to finance all this new spending without an added broad-based tax. But this is exactly why we should vigorously resist a VAT.

VAT has the potential to grow government above and beyond what we know today. Creating new taxes doesn't raise old ones, so its possible that it could seem like a better solution from a rhetorical standpoint. If this proposal moves forward, you can be sure the Tea Party movement will have a whole new issue to rally around...


Blog post



(And for those with the myopic template persona, non-support of additional taxation and ever expanding government is largely the polar opposite in support of fascism & increasing Government control)
 

[sirs]

If you think your taxes are bad now?you need to take a look at the lists below. 
---------------------------------------------------------------------------
Tax Increases Enacted since January 2009

This list, totaling more than $670 billion in tax increases includes the Health Care Bill, SCHIP, the Stimulus Package, and several other pieces of legislation which have been signed into law by President Obama.

[sirs]

Question: what do boiling oil and a new scheme to further fleece the American people have in common?

Answer: they?re both administered by a VAT.

With a $1.4 trillion deficit in 2009, a national debt of $12.8 trillion and counting, and inflation looming, the nation?s economic situation is dire. Yet rather than cutting spending or actually enforcing PAYGO rules (how quaint!), it appears that the Administration would rather float a new consumption-based national sales tax, known as the value-added tax ? or VAT ? to address its cash flow problem. Through a VAT, companies pay taxes for the value ?added? to a product at each stage of production. But eventually those costs just get passed on to consumers, so ultimately you and I will pay the VAT. Take, for example, building a chair. One man hammers a few pieces of wood together to make the seat and back: value added. The next guy puts on the legs? Value added. A third man attaches a cushion before it?s sold? Value added. If something so simple can be subject to three taxes that easily, you can only imagine the number of additional layers of unseen taxes that consumers will have to fork out their hard-earned money for.

A national sales tax has been promoted by some conservatives as a ?Fair Tax,? and a way to improve how the government collects revenue. Yet there's an important distinction between the Fair Tax folks and those you are pushing a VAT today:
the Fair Tax supporters want to replace the federal income tax with a sales tax, while
the VAT proposed by Madame Speaker and friends would add to Americans? existing tax burdens (which is already about to grow considerably as a result of the new health care law and the pending expiration of the Bush tax cuts.)

CBO director Doug Elmendorf recently acknowledged that his office has received several questions on the VAT ? certainly a precursor to a bill being proposed in Congress.

On April 6, White House advisor Paul Volcker, former chairman of the Federal Reserve, tacitly endorsed the idea, asserting recently that it was ?not as toxic an idea? as it once was.

Yet the idea should be toxic: For starters, it?s doubtful whether additional resources would even be used to pay down our debt. As we saw in the health care debate, policymakers are willing to game numbers in an attempt to appear fiscally responsible, but ultimately the new law added numerous new programs which will add to the federal government's already massive unfunded liabilities. It's clear Washington is focused on growing government, not paying down debt.

The VAT is also likely to become yet another pressure point for lobbyists. The British VAT is a labyrinth of exemptions; any American system is certain to become similarly complex in a short period of time. Think the stimulus package has created a boom in the lobbying industry? You ain?t seen nothing yet.

Most fundamentally, the VAT will be a vehicle to transfer more money from individuals to the government. You can see how this works in Europe. As Dan Mitchell of the Cato Institute writes, ?in 1965, before the VAT swept across Europe, the average tax burden for advanced European economies (the EU-15) was 27.7 percent of economic output, versus 24.7 percent of GDP in the United States. But the Europeans began imposing VATs in the late 1960s, and now the European Union requires all members to have a VAT of at least 15 percent. Good news has not followed. By 2006, the average tax burden for EU-15 nations had climbed to 39.8 percent, versus 28 percent in the United States.? It?s na?ve to think that American politicians will be sated once they receive just a tiny bit more of Americans? hard-earned money. Why would elected officials here be any different from their colleagues across the Atlantic?

This tax burden has acted as a draft on European economies. According to the Bureau of Labor Statistics, the U.S. created 45 million new jobs from 1982 to 2007, compared to fewer than 10 million in Europe. Although weak at the moment, U.S. economic growth has historically been much more robust than the European Union ? in no small part because more Americans are employed, and they work more hours, and they get to keep more of their money so they have more to spend and invest.

Instead of finding new ways to take money from American's pockets, government should focus on cutting spending. And there is plenty to cut. The Heritage Foundation?s Brian Riedl notes, ?Simply bringing real federal spending back to the $21,000 per household average that prevailed in the 1980s and 1990s would balance the budget by 2012 without raising a single tax on anyone. Even returning spending to the pre-recession level of 20 percent of GDP would eliminate two-thirds of the projected 2019 budget deficit without raising taxes.?

Cutting spending may seem like medieval torture to politicians, but it is far better than creating a new tax system that will burden already cash-strapped families and our already fragile economy.


Tax Me Once, Shame on You, Tax Me Twice...

[sirs]

WASHINGTON ? President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days.

Before deciding what revenue options are best for dealing with the deficit and the economy, Obama said in an interview with CNBC, "I want to get a better picture of what our options are."

After Obama adviser Paul Volcker recently raised the prospect of a value-added tax, or VAT, the Senate voted 85-13 last week for a nonbinding "sense of the Senate" resolution that calls the such a tax "a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery."

For days, White House spokesmen have said the president has not proposed and is not considering a VAT.

"I think I directly answered this the other day by saying that it wasn't something that the president had under consideration," White House press secretary Robert Gibbs told reporters shortly before Obama spoke with CNBC.

After the interview, White House deputy communications director Jen Psaki said nothing has changed and the White House is "not considering" a VAT.

Many European countries impose a VAT, which taxes the value that is added at each stage of production of certain commodities. It could apply, for instance, to raw products delivered to a mill, the mill's production work and so on up the line to the retailer.

In the CNBC interview, Obama said he was waiting for recommendations from a bipartisan fiscal advisory commission on ways to tackle the deficit and other problems.

When asked if he could see a potential VAT in this nation, the president said: "I know that there's been a lot of talk around town lately about the value-added tax. That is something that has worked for some countries. It's something that would be novel for the United States."

"And before, you know, I start saying 'this makes sense or that makes sense,' I want to get a better picture of what our options are," Obama said.

He said his first priority "is to figure out how can we reduce wasteful spending so that, you know, we have a baseline of the core services that we need and the government should provide. And then we decide how do we pay for that."

Volcker has said taxes might have to be raised to slow the deficit's growth. He said a value-added tax "was not as toxic an idea" as it had been in the past.

Since then, some GOP lawmakers and conservative commentators have said the Obama administration is edging toward a VAT.


Great rationale....it's "novel"