The Hudson Institute’s Irwin Stelzer, writing in the WSJ:
So we are to have a European-style value-added tax (VAT). That’s the emerging consensus in Washington as people come to recognize the reality of the deep financial hole into which the Obama administration has dug us.
[…]
The tax sounds simple, but don’t be fooled. Because both upper- and lower-income families pay the tax at an equal rate, the VAT is considered regressive; that is, it hits the poor harder than the better-off. So it is the practice in countries such as Britain to exempt food, which lower-income families spend a greater proportion of their income on. The technical term is “zero rating,” meaning that exempt items are taxed at a “zero rate.”
However, wait until the folks at the IRS get their hands on the regulations for the application of the new tax. […].
[…]
This process of writing regulations for the VAT man when he cometh is more than merely amusing. For one thing, it confers enormous power on faceless bureaucrats.
They can hand a competing product the advantage in the U.K. of a price 17.5% lower (in Sweden it’s 25%) than a close substitute. That invites both lobbying and corruption and sheer, inexplicable arbitrariness. Get your “sweetened dried fruit” deemed to be “held out for sale as snacking and home baking” and your product will bear a tax and have to compete on grocers’ shelves with zero-rated “sweetened dried fruit held out for sale as confectionary/snacking.” Peddle your sandwiches “as a general grocery item” and consumers pay no tax, but offer them as “part of a buffet service” and the VAT man wants his 17.5%.
Manufacturers twist and turn and juggle their product specifications and processes, not to find the most efficient way of making things but the surest way of obtaining a zero rating. The resulting inefficiencies cannot be measured accurately, but they certainly contribute to Europe’s lagging productivity and increasing inability to compete in world markets.
For a long time conservatives favored some sort of VAT, on the theory that it is better to tax consumption than jobs. But that support was based on the theory that taxes on incomes would be reduced to offset the increase from VAT.
That is not to be, given the preferences of the Obama team and the state of the nation’s finances. But what is to be is the reason liberals love VAT: It is easy to raise the rate, a bit at a time, unnoticed by the voters—just as a frog put into a pot of boiling water will immediately try to jump out, but placed in cold water that is only gradually heated it may not notice until it’s too late.
So there is a VAT in our future, and like other taxes, it will have unfortunate consequences. Since there is world-wide experience with this tax, none of those consequences can be deemed “unintended”—they are already out there for all to see.
Pretty soon, some wag is going to get the itch to ask why we bothered fighting the Revolutionary War in the first place.
At which point some other wag will quip, “Because we fancy our king have a tan.”
Is that a Chris Rock voice I hear?
/sarc
they’re taxing tans too
the yahoo finance propaganda homos are pimping an Atlantic VAT piece today
Aside from the fact that VAT’s are gay and that they are bad economics, the evidence strongly suggests that a little country what is as inept and corrupt as our little one is simply not a good candidate for the successful implementation of a VAT.
We’ll fuck it up.
It’s what we do.
Wow. It’s really difficult to see the social engineering implications in this ain’t it? They don’t care that it’s regressive if it means they can create unnatural incentives which force the poor into eating, say, organic locally-grown baby bella mushrooms instead of factory-farmed tomatoes from half-way across the world. The possibilities are endless for those with fascist impulses.
so are rube golberg’s contraptions
I can already hear ’em. You won’t miss one or two percent! It’ll be awesome! Think of the children. Then, before we know it, they creep it up and we’re paying 20% .
fucking fuckers.
HELLS NO.
I’d bet our resident trolls are all in favor of this, especially if it includes a rebate for value subtracted. They’d get rich.
McG – They would make money with every comment, since their comments tend to be informationally negative.
Nothing makes an economy get up and move like making everything more expensive.
You’re not suggesting that we can allow food deserts to exist in America, are you, racist? Why do you hate children, Abe?
Mankiw’s take on the VAT. Mankiw tends to treat the VAT (as a theoretical matter) as a neutral tax. Moreover, I think his characterization of conservative attitudes toward the VAT is pretty fair. Most conservatives do fear the ability of government to exercise greater control on the economy. What he doesn’t address in this post, but does in many other articles, is that conservatives’ fear is entirely justified by historic examples.
Carin, what on Earth would give you that idea? You just hate having a black President, don’t you?
I’m a hatey racist, Pablo.
It’s much, much worse than 1775. We are actually represented in Congress, as opposed to Parliment, and yet this crap is still being done to us. We’re complicit in our own undoing, speaking in a very macro sense.
Here’s what they need to do. In order for something to be legally sold in the US, the manufacturer should be required to affix a stamp to each item sold. The manufacturer or importer should have to purchase the stamp and ensure that the stamp is properly affixed, but the cost of the stamp should be legally passed on to the customer by the manufacturer, but the tax itself should be collected by the merchant. I think the most logical start would be with paper products, and attorney licenses…
High five!
scratch n sniff stamps!
Food desert. Heh. It seems like only yesterday that restaurant chains were being sued by activists to open in the hood and Koreans – who take to opening produce markets like Greeks to diners – were being run out of NYC slums by same activists because certain groups don’t react well when proprietors don’t like being stolen from.
I can easily envision more of a drumbeat to legalize marijuana, gambling and prostitution for the tax revenue down the line. Not that I’m opposed to any of that, but it’s a little disturbing when the impetus is insatiable federal gluttony. We can probably expect a movement to lower the drinking age at some point for similar reasons. Teens in bars equal cash money! These are difficult things to balance when you have the competing urges to control peoples’ lives and an unending lust for their money. But these dementia-addled jackholes are convinced a utopia lurks in there somewhere.
Abe,
Methinks Utopia is the sales pitch. Power is the real reason, no?
I agree OTT, but there’s also that whole gray area of delusion in between.
About fifteen years ago, out of boredom mostly, I kind of measured my own state-inflicted inefficiency. “How much of my time and money gets spent complying with or evading laws and regulations, and funding others’ compliance and evasion?” I kept track as well as I could without getting all xth-order about it, and I was running at about 50% attributable waste. And I don’t interact with the government or its wholly dependent professions (law, basically) at all.
It is, like dude says, immeasurable, but it’s not inestimable, and I think an economist who ran the estimate un-Keynesianly would find “the economy” in sum operates at below 0% efficiency, and has since about a hundred years ago.
Kinda like Pablo’s chart looks. Coincidentally.
I’m still in denial, myself.
It’s NOT designed as a tax. It’s not designed to “raise” revenue. A VAT is SPECIFICALLY designed to do nothing more than create more Democrat voters, pure and simple. Through redistributing money from you and me to people who are easier to please because they’re beggers.
Employ all kinds of “fairness” rhetoric about how everyone pays the VAT (appealing to our sense of fair play)…then they’ll raise all kinds of exemptions (and if you disagree, your a heartless racist scum) for the Democrats favorite dependent demographic, but only if they engage in “certain” behaviors that engender dependency. Like tax exemptions for public transportation (but not jitneys), exemptions for childcare (but not home schooling), and, my personal favorite, tax “credits” for amounts greater than the individual will ever be liable for. Which is welfare, plain and simple.
There will be no exemptions for entrepreneurship, no exemptions for middle-class folks, no exemptions for any behavior that might make the individual self-sufficient. Self-sufficient people are the enemy of the government because they don’t NEED the government. And when they don’t need it, they soon realize that if they can do without it, then ANYONE can do without it. And all of a sudden you realize your liberty is more important than anything Nancy Pelosi could dream up with her latest 5-year-plan.
The HORROR.
psycho,
Add to that those who are similarly preyed on by appendages of the government. The cost of making manufacutered non-compliance go away. Friend of mine who runs an auto-mechanic shop, talks about the 20 – 30 free oil changes he gives away to the city building, sewage, signage inspectors that come by citing violations. Some don’t even bother to get out of the truck while they claim his back yard (not in direct view of the street) haz mat precautions are being ticketed for violation.
Multiply and multiply and its a wonder anything moves at all.
Can we conclude that a tiny minority, seeking its own empowerment, holds a country hostage to endless layers of make-work and endlessly compounding laws? I mean, since this really isn’t about representation any longer.
The scary part is that to reach that conclusion you may have first noticed that because of the political machine, nature and man are fairly overwhelmed by all of the classic human sins, emotions, and instincts. That tiny minority trade in dishonesty, pride, envy, greed, abuse, and theft. They are self-legalizing thieves.
Seems kinda impossible yet here we are. I’m starting to sound like a Bush-era progg (D-Stalin) except this time the rhetoric can’t be blown completely out of the water by a gradeschooler.
RaisingSucking 2 to 3 percent of GDP out of the economy through a VAT is theoretically achievable.Fixed it for ’em, the bastards.
Why the idiot Democrats want so desperately to ape European failures is a mystery to me. Does little or no economic growth for decades at a stretch and chronic 12% to 20% true unemployment sound good to them? It’s all for the government dependency, I guess…
VAT makes for permanent poverty in the private sector. Freezing most everyone in their economic place and paying for a permanent government class to massage the poor just enough to keep them away from the pitchforks and complacent. Another mile marker on the road to State slavery and another thing to repeal if the Dems do it.
I’d launch a tax on the gratuitous use of euphemisms intended to cause google trouble.
Have a look at the VAT rates charged across the EU here. You’ll notice that the rates vary enormously across the member states. Also check out the reduced rates, and how they differ. In the UK, for example, food and children’s clothes are zero rated; heating gas is reduced (5%). If you build a new house, construction materials and some electrical appliances are also exempt.
The difference in VAT rates across Europe of course ends up in the inevitable: fraud. With such enormous sums involved, there is a lot to be gained from fiddling the VATman. So, you have something to look forward to.
But wouldn’t you like your own version of the great Jaffa Cake controversy
Ummm, Jaffa cakes. Time for a nice cuppa. Brb.
Sounds like the VAT can act as an angels, pins, lawyers (some assembly required) program. So: EMPLOYMENT!
I see a big opportunity in black market Levi’s, Mr Coffee’s and VCRs. I say we import them from China in containers marked “rags” and “drywall” and park those suckers in every stadium parking lot and flea market in the country (with the exception of NYC, NJ, Philly and Chicago, let the Russians and the Italians fight over those dumps). When the wall comes down, we’ll be the new Harbor Freight!
Now you’re getting the idea! This is an opportunity for OUTLAWs!
I wonder what would happen if Republicans totally disengaged with the tax battle, with the precondition of spending must not exceed revenue.
Hold a press conference, and say we keep the current system, Democrats can set the rates where they want, un-opposed, but there will be zero, none, nada deficit spending, and the interest on the debt must come down every year. Once that’s become reality, then start selling the idea that enterprise goes down when taxes go up.
Spending is the problem, and that fact tends to be forgotten in the constant battles over the taxing methods.
Its sad really, all of these contortions and connivances instead of doing the obvious and cutting spending…
The VAT is being taked about as if it is fait accompli, instead of discussing any obvious alternative. I mean, how about we start by rolling back the nearly 25% increase indiscretionary spending that the dark lord Obamus (I know, RAAAAAAAAACIST!) and the Democrat apparatchicks insinuated into the alleged stimulus bill; essentially their “wish list” of programs from the preceeding 15 years.
But instead, we will institute policies that have a track record of hamstringing economic growth, all in the interest of providing the bread, circuses, and, you know, i-phones and big-screen-TV’s to the preferred victimhood groups in order to guarantee that a permanent slim majority will be pre-disposed towards socialism.
Well – I don’t add any value to anything, so obviously I don’t owe any tax.
That’s my story, anyway, and I’m sticking to it…
27. Comment by Spiny Norman on 4/5 @ 9:32 am #
Why the idiot Democrats want so desperately to ape European failures is a mystery to me. Does little or no economic growth for decades at a stretch and chronic 12% to 20% true unemployment sound good to them? It’s all for the government dependency, I guess…
What, you’d rather be a face than a boot?
P-L-U-T-A-R-C-H-Y
It’s a frickin’ disgrace how our best and self-important have slogged so many miles through grad school for that spot in the bureaucratic class, only to see their salaried asses get priced out of the good life by all those enterprising rubes, with their coffee shops and salons and all their other rackets.
Now get back in line.
Septic System – Septic Tanks – Septic Tank Maintenance…
Professional plumbers use high powered water jets, core lining and even cameras to survey the situation, something not available for DIY….
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