Just about everyone agrees our complex personal and corporate income tax laws are too painful and expensive — tax filing, record keeping and the like cost at least $170 billion a year. They are unfair — billionaire Warren Buffett laments his tax bracket is lower than his secretary’s is. And the system kills jobs — although some businesses use political influence to pay a fraction of their fair share, most pay much higher taxes than do foreign competitors lest they move factories and other activities abroad.
Hey, Pete, tell us something we don’t know. The problem that everyone has with repealing the income tax — economists, government officials, and the media — is that they want to get rid of the income tax but keep raising the same amount of money for the government to spend. And many of them think that the answer is to make the same mistake that Europeans have made:
Other industrialized countries limit these problems by relying more on consumption taxes than income taxes, and support is growing among Democrats and Republicans to shift the U.S. system in that direction. The most efficient solution would junk income taxes altogether in favor of a simple national sales tax — a valued-added tax (VAT) similar to one used in much of Europe.
Before we go any further, you need to know that a value-added tax is a tax that is collected at every level of production. For instance, in the case of a loaf of bread, the farmer gets taxed when he takes his wheat to the mill. And the miller gets taxed when he sells his flour to the baker. And the baker gets taxed when he sells his bread. Here’s the rest of Pete’s take:
A VAT would favor no activity over another, and by taxing goods and services at the point of sale, it would end the problem of U.S. firms parking profits abroad to avoid taxes.
Sounds reasonable, doesn’t it? But that statement is a red herring. Pete is using the old “we’ll finally get the money that those dastardly corporations aren’t paying us” ploy. They’ll also get you, my pretties. And your little dog too.
One reason why governments love the VAT is that it is a ‘hidden’ tax; the consumer doesn’t know the amount of tax he is paying. Mr. Morici completely ignores this fact as he shills for the VAT:
A VAT is not progressive — it taxes rich and poor consumers at the same rate. The elderly, who more or less live on savings, have already paid income taxes on those savings and would be taxed again.
Good Lord, not this again. Look, the rich don’t pay taxes. That’s why they set up foundations and trusts. They don’t have ‘income’ from wages like the little people; most of their money comes from other sources and that money is taxed at a lower rate. That’s why Warren Buffet paid taxes at a lower rate than his secretary. Pete finishes with this:
Elegant, egalitarian and efficient, such a VAT without exemptions would give Americans the tax reforms they want…
Ah yes. The time-honored appeal to ‘fairness’ and ‘efficiency’. Even if we enacted a VAT, the idiots in Mordor on the Potomac would probably ‘forget’ to repeal the 16th amendment, leading to even more taxation and spending. That’s not what we want, Pete. We want the government to stop spending like drunken frat boys on Spring Break. We want the government to stop giving our money to terrorists. And we want the government to get its hands out of our pockets and leave us the hell alone.