“An economy hampered by restrictive tax rates will never produce enough revenue to balance the budget,just as it will never produce enough jobs or enough profits.”
– John F. Kennedy
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
– Winston Churchill
In 2016, what seems to be driving the success of the “outsider” candidate for president is a combination of border security, and, well, the economy. Specifically, that the international treaties and agreements known as “free trade” coupled with protectionist tariffs and other anti-American business taxing schemes that are driving trade deficits higher, and American businesses to set up shop overseas need to go.
While the idea and discussion of tax policy is pretty mind numbing and not all that sexy for the American people’s consumption palates most times other than the first two weeks of April every year, the clear explanation of what the different sorts of taxes are that transfers our wealth to government does need some attention, particularly at the federal level, since one candidate, Ted Cruz, is proposing BOTH a sort of flat income tax and what amounts to a value added tax or VAT that will be levied at the producer end of consumption. He calls it something else, but this tax is a consumption tax that the people will never see, but producers and businesses sure will, since it will be built into the final cost of consumable goods, and will need to be paid out of corporate profits. In that way, the sellers will just build in the cost of a VAT into the final price of a product. (This is what he and Marco Rubio argued about a couple months ago. In that argument, Rubio was right.)
As a published author of e-books (novels written under a different pseudonym) the topic of VATs has gotten personal. With books sold all over the world online, any time one is sold in a country that has a VAT, before fees are taken out of the profits for the retailer and distributer, the VAT of the country where the book sells is paid to that country. This cuts into profits at varying rates around 20% per book. And that is BEFORE I get paid – and further ripped off – after the exchange rates are applied.
For most of the world, this is the way value added taxes work. The VAT, and any other local taxes if there are any, are added into the final cost of the product and that is what is presented to the consumer as the price on the shelf. In contrast, in the United States, state and local sales taxes are added at the cash register, a practice that generates numerous complaints from people visiting from other nations. When outlined that way, We the People see how much we are being charged for this that or the other. If one were to actually keep track of the taxes paid for bond issues, alcohol, property, and utilities like sewer as well as keep a running total of state and local earnings taxes (income taxes by another name) and payroll taxes (FICA, Social Security, etc.), the final tally might well be eye popping, but it at least is out in the open, and trackable. A VAT, when added into the final cost, just like gasoline taxes to the average consumer, is not.
And that is the main issue when it comes to limited government and taxes with a VAT. There is no way to expose to the people with ease the reality of just how expensive government is. A VAT would hide that – and hide the amount of money that government confiscates from the people. This is why a VAT should be avoided at all costs. History has proven that once such a tax takes hold, it will never go away, and if the American people and the country are to be prosperous in any real sense, we should be allowed to keep as much of our money as possible.
As an aside, the VAT in various countries acts as a trade barrier similar to the tariff situation, which, actually, is more honest. This is all part and parcel of the “bad deals” Donald Trump discusses on a regular basis that is holding American prosperity back. Our representatives are still using all of the methods above to tax us.
If memory serves, that’s a variation of what started the first revolution.