Set On A VAT? Then Get Rid Of Income Tax

width=71By George F. Will   When liberals advocate a value-added tax conservatives should respond: Taxing consumption has merits so we will consider it after the 16th Amendment is repealed. A VAT will be rationalized as necessary to restore fiscal equilibrium. But without ending the income tax a VAT would be just a gargantuan instrument for further subjugating Americans to government. Believing that a crisis is a useful thing to create the Obama administration which understands that for liberalism worse is better has deliberately aggravated the fiscal shambles that the Great Recession accelerated. During the downturn federal revenues plunged and spending soared. And as will happen for two decades every day 10000 more baby boomers are joining the ranks of recipients of Medicare and Social Security two programs with unfunded liabilities of nearly $107 trillion. In the context of this concatenation of troubles the administrations highest priority was to put an enormous new health care entitlement on the welfare states rickety scaffolding. Why? Because the liberals lunge to maximize governments growth depends on quickly creating a crisis that can be called a threat to the entitlement menu and to the currency as a store of value. Then the public can be panicked into accepting the addition of a VAT to the existing menu of taxes. A VAT is collected on value added at stages during the process of production but most of its burden is borne by consumers. They file no VAT returns so its stealthiness delights the political class which can increase it in small barely noticed increments with every percentage point yielding another $100 billion. Although the nations welfare often varies inversely with that of the political class a VAT would ameliorate a real problem: Americans consume too much and save too little. Furthermore todays baroque tax code drives economic distortions and enables corruptions. Corporations do not pay taxes they collect them passing the burden to consumers as a cost of production. And corporate taxation is a feast of rent-seeking a cornucopia of credits exemptions and other subsidies conferred by the political class on favored and grateful corporations. Because the income tax is not broadly based it radiates moral hazard: Its incentives are for perverse behavior. The top 1 of earners provide 40 of that taxs receipts; the top 5 provide 61; the bottom 50 provide 3. So the tax makes a substantial majority complacent about governments growth. Increasingly the income tax is codified envy. A VAT is the political classs recourse when the resources of the minority that is targeted by the envious are insufficient to finance ravenous government. Because a VAT would shred Barack Obamas promise not to increase any tax on households with incomes less than $250000 he must hope that the deficit reduction commission he created will provide cover for his apostasy. But 14 of the commissions 18 members must endorse any recommendation. Good luck finding two votes for a VAT among the six Republican members Sens. Judd Gregg Tom Coburn and Michael Crapo and Reps. Paul Ryan Dave Camp and Jeb Hensarling. And wait until the political classs most imperious masters the elderly are heard from. When they worked they paid taxes on their incomes; retired they will resent they are virtuosos of resentment being taxed when they spend their savings. Because a VAT potentially taxes everything it would be riddled with exemptions. This is because it maximizes the political classs opportunities for showing favoritism by for example exempting certain green goods. It also widens that class scope for the pleasure of being bossy. For example it could reduce a VATs regressiveness like rain a VAT falls equally on the rich and the poor but the poor devote a larger portion of their income to consumption by exempting most foods but not those that the nanny state disapproves: Put down that sugary soda and step away from the vending machine! Money is time made tangible the time invested in the earning of it. Taxation is the confiscation of the earners time. Although some taxation is necessary all taxation diminishes freedom. Adding a VAT without subtracting the income tax would constrict Americans freedom much more than the health care legislation does. Because the 16th Amendment will not be repealed adoption of a VAT would proclaim the impossibility of serious spending reductions and hence would be the obituary for the Founders vision of limited government.
by is licensed under
ad-image
image
03.13.2025

TEXAS INSIDER ON YOUTUBE

ad-image
image
03.11.2025
image
03.10.2025
ad-image