A VAT-full of Taxes

Early in June 2010 a proposed one-cent sales tax increase for the Fire Fighters in Palm Beach County, Fl was successfully beaten back by a host of groups who saw it as bad public policy. At a time when property values have fallen more than forty percent in some cases from 2007, any talk of new taxes is not popular.


How would things have turned out if that same tax increase was done by a bureaucrat in Washington, and spread over the whole state or nation, and no one was none the wiser? Maybe we would eventually sense that things were continuing to get more and more expensive, but we couldn’t put our finger on what was going wrong. Prices on items from bubble gum to bus tickets; from gasoline to hotel rooms would continue to increase but no one would be able to identify which taxes were responsible. The politically-favored fire fighters union would be congratulating themselves, however, on another victory, while the rest of us would carry a heavier tax burden and not be able to do anything about it.

What is the VAT? It is a tax placed on a product at every level of its creation. Every sales transaction is taxed, unlike our existing sales tax system which only taxes the final sale to the consumer . With VAT, the percent of tax at each level is small, but the accumulated tax adds up to as much as twenty-five per cent overall. Compare that to our 6.5 percent sales tax in Palm Beach County, Florida.

The VAT is a kind of sales tax on steroids.

With the VAT, there never would have been a hearing with the county commissioners. It just would have become another line item in a county budget that received funds from the state and Federal government, apportioned according to some esoteric formula that was decided “on high,” far from the teeming masses of the unwashed (that’s you and me.)

The Federal Government is going to propose a VAT as a way (they say) to “balance the budget”. It will totally transform our national system of tax collection and be a god-send to the tax and spend politicians who never saw a tax increase they didn’t like – except those that embarrassed them. But in European countries, which have had the VAT for decades, there is no serious thought of balancing the budget. They always find spending that is more “necessary” than leaving money in the pockets of the producers. So they get nation-level defaults like in Greece, and Portugal, and Spain, and next, the US.

If you think this Recession has been fun, wait until they impose a VAT on the US. But we still have a chance to dodge the bullet – ask where each political candidate stands on a VAT, and if they favor cutting spending at all levels of government. If they think the answer is more taxes and spending – scratch them off your list. The money you save will be your own.