April 13, 2010

Into The VAT

We hear more and more about the pushing of the Value Added Tax by the kommies in our midst, who thing every working (or spending) American is a mere cash sponge to be wrung out without mercy in order to finance the ever-increasing monetary demands of a socialist country.

Recently, progressives have made noise about introducing a value-added tax (VAT) in the United States. The VAT is an indirect tax — that is, Americans wouldn’t pay the tax directly to government, but would pay it to businesses as part of the retail price of things we buy, and businesses would then remit the tax to Uncle Sam.

A VAT is set at a fixed rate — say, 10 or 15 percent — added to the price of a good at every step of production, with a deduction allowed for the amount of VAT paid during earlier stages of production. The more steps there are in transforming raw materials into complex consumer goods, the higher the resulting consumer price as a result of those multiple layers of taxation.

Many countries have VATs, including Canada, Mexico, and the European Union. One might say that a VAT is an emblem signifying that a country’s government consumes a large percentage of its GDP, for VATs seem to go hand-in-hand with big-budget nanny states.

The reason for this phenomenon is simple: Any government that seeks to be all things to all people, and therefore seeks to spend ubiquitously, must inevitably seek to tax ubiquitously. Such governments have insatiable appetites for revenue. Because VATs are cash cows, diverting huge sums of money from consumers to government, they are favorites of big-spending governments.

Unfortunately, though, VATs have significant negative economic consequences.

Because they inflate consumer prices, quantities demanded fall. Most often, the marginal buyers who can no longer afford to pay the higher price are poorer citizens. When government policy raises
prices, the first victims are poor people.

The second victims of a VAT are the workers who will lose their jobs as a result of falling demand for the newly higher-priced goods.

Many affluent Americans may not curtail their consumption, but because more of their money is diverted to the government treasury, their savings must correspondingly decline. This results in decreased capital accumulation, which, in turn, slows business expansion, development, and formation. It also slows the growth rate of labor productivity, hence retarding economic progress for workers.

Read on.

These leftists, who have no respect for the Constitution nor for the intentions of our founding fathers, and who certainly despise the very principles that define the United States of America, would love to watch our nation come apart, sinking into an abyss of socialism…

…and as a bit of lagniappe, let’s finish with an excellent and unrelated column by Wesley Pruden.

by @ 11:59 am. Filed under Assholes, Congress, Parasites, Politicians, Socialism, Taxes, The Economy, Weasels
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2 Responses to “Into The VAT”

  1. The Gray Monk Says:

    With VAT currntly at 17.5% in the UK and 19 - 21% elsewhere in the EU, you can see the problem. It i, as you rightly say, a tax on tax. The rising cost has a second impact the proponents choose to ignore. It leads to increases in wage demands as people seek higher wages to maintain their lifestyles and offset the tax, that leads to higher prices and job losses and more demands for higher wages…

  2. Seth Says:

    Gray Monk –

    It leads to increases in wage demands as people seek higher wages to maintain their lifestyles and offset the tax, that leads to higher prices and job losses and more demands for higher wages…

    Which seems to be the “liberals’” (Good term, that, as their ultimate goal seems to be to “liberate” us from our liberty)stock in trade.

    They believe that repeating agendas that have gone wrong forever might suddenly see success, then when the usual results and the consequences come around, they are conspicuously innocent of accountability, somehow summoning up the chutzpah to blame the people who were against it from the start.

    Anyone who confronts them with real facts and figures that demonstrate the inadvisability of pursuing a given issue is just “being political” or a “racist”.

    A guy who commented at a blog I used to read a long time ago remarked that: Arguing with a liberal is like standing in a bucket and trying to pull yourself up by the handle.

    They will continue to erode our civilization with their destructive agendas and then distance themselves when the fruits of their labor when those fruits prove to be poisonous.