Later this year President Obama will be appointing a special group to look into debt reduction. The group will be slanted at least 2 to 1 in the Democrats favor and it is almost a lock that they will recommend an increase in taxation. For those who think this recommendation will be another “tax the rich” scheme it will not be. Instead they will suggest adopting a form of taxation called the Value Added Tax or VAT tax. This will do untold harm to our nation’s economy.
First of all what is a VAT tax and how does it work?
“A VAT is levied on the “value added” to goods and services as they pass through each stage of the production process. (from the Heritage Foundation)”
“No matter how many steps there are in the production process, a fixed percent of the final price of the product would represent the value-added tax, just as a retail sales tax is a fixed percent of the final product price. However, unlike a sales tax, the cost of the VAT to consumers would be hidden. Unless politicians took the unlikely step of requiring retailers to state explicitly the portion of the sales price that is due to the VAT, consumers would be unaware of the tax. (also from Heritage Foundation)”
So when this VAT is added all levels of production is going to be taxed and worse it’s a hidden tax. This means that when you go to the store you will see the cost of ALL goods have gone up and you will not know the reason. This new form of taxation will hit everyone not just the rich and cause business to hire less people because their cost have gone up as well.
The reason why Europe’s tax rate is so much higher than our own is because of VAT. It is there to pay for all their social welfare programs but one thing it doesn’t do is control government’s spending. With this hidden source of revenue the people do not notice all the extra money they are losing to pay for wasteful government projects. This happens in Europe and it will happen here by increasing the tax burden on all Americans and it creates another hurdle that our sick economy does not need at this time.
“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. (From National Review)”
The BEST way to reduce the deficit is to stop spending money the country doesn’t have, start fixing the entitlement programs and get our economy growing again so we can have jobs.