Old joke about the VAT

Why doesn’t the USA already have a VAT?

  1. Conservatives oppose a VAT because it’s a huge source of money for expanding government.
  2. Liberals oppose a VAT because it’s horribly regressive, disproportionally taxing the poor.

We’ll get a VAT once Liberals realize it’s a huge source of money for expanding government and Conservatives realize it’s mostly a tax on the poor.

Maybe it’s not quite the money machine?

Of the many reasons to object to ObamaCare, this one should be bipartisan:  it burns through options for fixing our other soon-to-be-bankrupt entitlement programs.  Instead of using a combination of taxes and cuts to fix Social Security and Medicare, we use them up creating the mother-of-all unfunded programs.

We’ll get higher taxes, more spending, more debt, and leave ourselves fewer options to fix them all.


Is the VAT a Money Machine? (cont’d)   [Andrew Stuttaford]

Veronique, I’ve just had a quick scan of that article (not enough to do it justice, I’m sure: I’ll read it properly later), but if indeed it can be shown that VAT is an efficient source of revenue without necessarily increasing the overall size of government, that’s a good result. Remember too the circumstances of the current debate. As much as I am in favor of reducing the size and cost of the state (and doing so sharpish), the current mess is not going to be sorted out without some increase in tax receipts — and, no, economic recovery will not by itself be enough quickly enough to do the trick.

If we have to increase taxes, that is better achieved by a broad-based tax than heaping yet more levies on individual income. The question of corporate taxation is a different matter. It’s difficult to avoid the conclusion that rates are too high, and loopholes too generous — the perfect state of affairs for the rent-seekers of Congress. It is thus unlikely to, what was the word, “change”.

04/09 12:14 PMShare

UPDATE 2:  (04/10/10) from Mark Steyn’s weekend column

And yet for an increasing number of Americans, tax season is like baseball season: It’s a spectator sport. According to the Tax Policy Center, for the year 2009, 47 percent of U.S. households will pay no federal income tax. Obviously, many of them pay other kinds of taxes — state tax, property tax, cigarette tax. But at a time of massive increases in federal spending, half the country is effectively making no contribution to it, whether it’s national defense or vital stimulus funding to pump monkeys in North Carolina full of cocaine (true, seriously, but don’t ask me why). Half a decade back, it was just under 40 percent who paid no federal income tax; now it’s just under 50 percent. By 2012, America could be holding the first federal election in which a majority of the population will be able to vote themselves more government lollipops paid for by the ever shrinking minority of the population still dumb enough to be net contributors to the federal treasury. In less than a quarter-millennium, the American Revolution will have evolved from “No taxation without representation” to representation without taxation. We have bigger government, bigger bureaucracy, bigger spending, bigger deficits, and bigger debt, and yet an ever smaller proportion of citizens paying for it.

The top 5 percent of taxpayers contribute 60 percent of revenue. The top 10 percent provide 75 percent. Another 40-odd percent make up the rest. And half are exempt.

If 51 percent can vote themselves government lollipops from the other 49 percent, soon 60 percent will be shaking down the remaining 40 percent, and then 70 percent will be sticking it to the remaining 30 percent. How low can it go? When you think about it, that 53 percent of American households props up not just this country but half the planet: They effectively pick up the defense tab for our wealthiest allies, so that Germany, Japan, and others can maintain minimal militaries and lavish the savings on cradle-to-grave entitlements. A relatively tiny group of people is writing the check for the entire global order. What proportion of them would need to figure out that the game’s no longer worth it to bring the whole system crashing down?

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