VAT is neither fair nor responsible

By Kevin Price

It is interesting how the left will take a politically popular idea and pervert it into something that will only further destroy a country that is already well down the road to serfdom. The latest example is the Obama administration's repeated statements that it is looking into the possibility of a Value Added Tax (VAT). This comes after almost two decades of millions of Americans advocating a "Fair Tax" instead of the current income tax system. Obama's apologists will state that they both are, after all, taxes on consumption. The similarities after that, however, largely evaporate.

The Fair Tax is a system that has been promoted for years by individuals who support limited government and greater voter participation in the political process. Today, less than half of all Americans pay federal income taxes. This reality has been like a continuous cold shower on a population that should be on fire because government is out of control. A "Fair Tax" would be a national sales tax on every good and service. Everyone would know that cost of government at every transaction. Millions of Americans who have been sleeping politically, would come to an abrupt awakening. Centerpiece in this strategy would be that this tax would replace the very destructive and archaic income tax system, which wages a direct war on wealth and job creation.

In addition to waking up a sleeping public to the depth of our fiscal crisis, this law would also allow us to tax illegal aliens in our country and those who are committing illegal activities. Drug dealers, prostitutes, and others involved in illegal actions would now contribute to the government and help pay for the law enforcement designed to keep them in check. Who else should pay for these crimes? Remember, they are all involved in illegal activities; they have their income completely tax free. This reform would allow us to take a financial "bite out of crime."

Then there is the Value Added Tax. Like the Fair Tax, it would tax consumption. In fact, it would tax every single step of the production of every single good. Unlike the Fair Tax, VAT would be in addition to our current income tax system. Furthermore, it is a hidden tax that is included automatically in the price of goods. Where the tax begins and the real price ends, the typical consumer will be unsure.

The National Center for Policy Analysis notes that "The VAT has been in use in European countries since the late 1960s, and has had a strong, negative economic influence, says (Pete) du Pont (former governor of Delaware and current national policy chairman of the organization): Before the European VATs were put into effect, the average tax burden in the European Union (EU) was 28 percent of gross domestic product (GDP), compared with the 25 percent in the United States. By 2006, with the VATs, the EU average tax burden was 40 percent compared with 28 percent in America."

In addition to that,"Average European government spending was about 30 percent of GDP when the VATs were instituted in the late 1960s." Today we see that European "government spending has grown more than 50 percent and now hits 47 percent of GDP." Debt in European government in 2005 "was 50 percent of GDP, compared with under 40 percent in America." The biggest tax of all on Europeans has been on job creation, according to du Pont, "Between 1982 and 2007, Europe created fewer than 10 million new jobs versus 45 million in the United States. Our economic growth was more than one-third faster, says du Pont." That is, by the way, the entire continent of Europe.

Access to revenue does nothing in terms of providing fiscal restraint, as we have seen in the case of VAT or the many tax increases we regularly see in this country. In fact, new taxes and increases in old ones have encouraged governments to tax more. The answer to America's fiscal problems are found in less taxes and, more importantly, less government.

© Kevin Price