Sunday, April 25, 2010

VAT: An Unmitigated Disaster for Free Enterprise

A VAT tax would be the proverbial nail in the coffin for our once thriving free enterprise system. Chronically high unemployment rates, a burgeoning growth in government, more costly dependency on government, and anemic economic growth far into the future will surely result.

As you know, VAT, or a value-added tax, is, for all practical purposes, a national sale tax on the price of goods at each stage of production. In short, VAT is an insidiously regressive tax, a silent economic killer which would increase the cost of goods for everyone--inclusive of those least able to pay.

Though Obama has characterized VAT as a "novel" idea which has "worked in other countries", meaning our economically comatose socialist friends in Europe, he hasn't taken VAT off the table and would consider adoption of VAT should his bi-partisan "deficit commission" recommend it in December. But, does anyone really have any serious doubts about where Obama's sentiments lie on this issue?

In an interview I heard recently, his preference for reducing our unsustainable deficit is to reduce "wasteful spending". Hmmmm. But, of course, we all know that virtually all entitlement programs--newly hatched, long-standing, and those yet to be foisted upon us--are near and dear to his ideologically driven heart and would never be considered "wasteful spending" by any self-respecting neo-Marxist. So, there's scant chance that extravagant entitlement spending will be effectively reigned in on his watch. Of that we can all be certain.

Thus, my fear is that VAT will be adopted but that it will do absolutely nothing to appreciably reduce deficits. In fact, if anything, VAT will serve only to feed the proverbial beast by condoning existing profligacy and encouraging more growth in entitlement spending. In short, indulging a drug addict with more drugs simply doesn't work to correct the addiction.

Taken in combination with existing tax burdens, e.g. state and local property & sales taxes, other hidden service fees/tariffs and federal income taxes, the tax burden for Americans could well catapult to a suffocating 70% level, and in painfully short order. And, remember, taxes never go down. They invariably go up, up, and up.

And even with VAT, to reduce the deficit the gov't will still be compelled to reduce the amount given back to the taxpayers in the form of reduced entitlements. And both you and I know that since that's most likley not going to be tolerated by a majority of voters, such reduction will not be sanctioned by a self-serving government hellbent on buying our votes with our money.

The solution, of course, is to drastically reduce government to a third of its current gargantuan, parasitic size. For a start, get rid of the rapacious Dept. of Education, et. al. departments, bureaucracies which have no Constitutional basis for existence. Then quickly and intelligently reduce entitlements across the board and, going forward, rely upon free market principles to reduce the cost of social security and medical care. And if that can't be timely accomplished by Washington elites, then it looks like an expedited Article V Constitutional Convention is in order to get the job done once and for all.

Finally, squandering America's stellar intellectual resources by not tapping their expertise to solve problems of this magnitude is the height of irresponsibility and superficiality. Let's face it, folks, there are some very bright and extremely well-grounded economists out there who could do a spectacularly better job of fashioning a plan to rescue America from bankruptcy than the gaggle of political hacks comprising Obama's insipid "deficit commission". But, then, Obama and company aren't really looking for honest, cogent and intelligent solutions, are they.