Photo by Kristen BonsI've been hearing a lot about the Value Added Tax (VAT) recently. Since he was sworn in, President Obama has done nothing but raise our taxes and entitlements. Over the past year and a half, he has promised more, more, more for Americans, all while our unemployment hangs around 10% and our deficit explodes exponentially. Free health insurance! Free coupons for cars! Free stimulus money in your paycheck!
Because President Obama has made so many promises for government-provided services, he now has to come up with a way to pay for all of that goodness. After all, there really isn't any such thing as a free lunch.
President Obama campaigned on the promise that no one making over under $250,000 annually would see an increase in their taxes. I'm not sure what he calls the tobacco tax. Or the $695 people will be forced to pay the government if they choose not to purchase health insurance. Apparently not taxes, though.
As someone who has called speeding tickets "speeding taxes" for years, I'm not buying it. Any money the government gets from me for any reason is a tax. Some taxes I pay when I purchase something (sales tax), some just because I work (income tax), some I pay for services provided (marriage licenses), and some I pay as a penalty for my actions (speeding tickets). But they're all taxes, as that money goes to support the state.
We already know that the Bush tax cuts are set to expire in 2011, yet somehow this isn't viewed as raising taxes. I can't wrap my brain around the idea that taxes aren't being raised, just that tax cuts are expiring. In my opinion, if taxes are at one level today, and another level tomorrow, they've either been raised or lowered. Simple.
But raising income taxes isn't going to begin to cover the massive spending that the Obama crew in Washington has put into motion. The money has to come from somewhere.
One idea being tossed around is the VAT. Which is ridiculous, because as my close and personal friend Adam Baldwin* says, "[The] VAT would a) violate the Constitution's Interstate Commerce Clause and/or b) couldn't work without first repealing Amendment XVI."
But it might be worth all the work of changing the Constitution to implement the VAT if it actually works, right? I'm the first person not to mind a little bit of elbow grease if the end result pays off. I'm willing to give anything a look-see, even the idea of changing our Constitution. Our Founders did put in place a system to change it, and if you ask me, our country is a better place since we abolished slavery or gave women the right to vote.
I'm a big results girl, so my first thought is to see if a VAT has ever been implemented elsewhere and how it affected that economy.
As it turns out, Europe has a VAT. In theory, the tax seems to be a viable alternative to the income tax. It taxes production at every stage, as opposed to our current system of sales tax, which taxes only the end consumer. It could even be considered "fairer" depending on how it's implemented.
The reality never seems to match up to the fantasy, though. In Europe, the VAT hasn't replaced income taxes; it's just been added on top of them. It's increased revenue for government spending (i.e., taxes), but at the expense of "lower levels of income growth and job creation."
The average income of an average citizen in the European Union is $2,000 less than the average income of a resident of West Virginia, one of the poorest American states. It seems that a cradle-to-grave entitlement state made possible by a VAT doesn't lead to economic prosperity. In fact, it leads to fewer jobs, less productivity, and a less prosperous nation.
According to Dan Mitchell of the Cato Institute: "Well, 'VAT' is just a way of spelling 'big government' in Europe, because that's exactly what we've seen happen there. They put in the VATs, they promised to reduce or get rid of other taxes; they didn't. The same thing would happen in America. The end result, after all these years, is they have much, much bigger governments. They didn't reduce deficits. Deficits in places like Greece and Ireland and England are higher than what we have, and their national debts are higher than what we have. The only argument for a VAT is if you're a big government politician and you want a brand-new tax so you have new loopholes to auction off to campaign contributors, and you have more money to spend buying votes with the tax money of the American people."
The Value Added Tax will only raise our taxes, and I don't know about you, but I'm taxed enough already. Just say no to new government spending programs and the crippling taxes that come with them.
*Adam Baldwin isn't actually a close and personal friend of mine, but rather a conservative celebrity (yes, they exist) who knows someone who knows someone who knows someone who happens to know me. He happens to feel passionately about interstate commerce laws and was poked into providing a quote for this article so that I could pretend to be semi-important for at least 30 seconds.