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The Vat Cometh
· Friday, March 26, 2010
WASHINGTON -- As the night follows the day, the VAT cometh.
With the passage of Obamacare, creating a vast new middle-class entitlement, a national sales tax of the kind near-universal in Europe is inevitable.
We are now $8 trillion in debt. The Congressional Budget Office projects that another $12 trillion will be added over the next decade. Obamacare, when stripped of its budgetary gimmicks -- the unfunded $200 billion-plus doctor fix, the double counting of Medicare cuts, the 10-6 sleight-of-hand (counting 10 years of revenue and only 6 years of outflows) -- is at minimum a $2 trillion new entitlement.
It will vastly increase the debt. But even if it were revenue-neutral, Obamacare pre-empts and appropriates for itself the best and easiest means of reducing the existing deficit. Obamacare's $500 billion of cuts in Medicare and $600 billion in tax hikes are no longer available for deficit reduction. They are siphoned off for the new entitlement of insuring the uninsured.
This is fiscally disastrous because, as President Obama himself explained last year in unveiling his grand transformational policies, our unsustainable fiscal path requires control of entitlement spending, the most ruinous of which is out-of-control health care costs.
Obamacare was sold on the premise that, as Nancy Pelosi put it, "health care reform is entitlement reform. Our budget cannot take this upward spiral of cost." But the bill enacted on Tuesday accelerates the spiral: It radically expands Medicaid (adding 15 million new recipients/dependents) and shamelessly raids Medicare by spending on a new entitlement the $500 billion in cuts and the yield from the Medicare tax hikes.
Obama knows that the debt bomb is looming, that Moody's is warning that the Treasury's AAA rating is in jeopardy, that we are headed for a run on the dollar and/or hyperinflation if nothing is done.
Hence his deficit reduction commission. It will report (surprise!) after the November elections.
What will it recommend? What can it recommend? Sure, Social Security can be trimmed by raising the retirement age, introducing means testing and changing the indexing formula from wage growth to price inflation.
But this won't be nearly enough. As Obama has repeatedly insisted, the real money is in health care costs -- which are now locked in place by the new Obamacare mandates.
That's where the value-added tax comes in. For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude -- if you exempt food, for example, the yield would be more like $900 billion).
It's the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent.
American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.
Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama's triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan's strategy was to starve the (governmental) beast in order to shrink it: First, cut taxes -- then ultimately you have to reduce government spending.
Obama's strategy is exactly the opposite: Expand the beast, and then feed it. Spend first -- which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.
And the VAT is the only trough in creation large enough.
As a substitute for the income tax, the VAT would be a splendid idea. Taxing consumption makes infinitely more sense than taxing work. But to feed the liberal social-democratic project, the VAT must be added on top of the income tax.
Ultimately, even that won't be enough. As the population ages and health care becomes increasingly expensive, the only way to avoid fiscal ruin (as Britain, for example, has discovered) is health care rationing.
It will take a while to break the American populace to that idea. In the meantime, get ready for the VAT. Or start fighting it.
(c) 2010, The Washington Post Writers Group
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RiverKing
And PLEASE understand the difference between a European-style VAT and the Fair Tax. Both are sales taxes and taxes on consumption but a VAT is imposed every time a material or product is sold. At every step from mine (or other initial source) through every processor and distributor, all the way to the consumer, a VAT is collected and this means compounded taxes. The proposed Fair Tax (see HR 25) would be imposed only on retail sales and then only on new goods; purchase of anything used would be tax free. The Fair Tax would also replace all current income-related taxes. Go to www.FairTax.org for more information.
Posted March 26, 2010 at 2:02:00 AM
M Rick Timms
The saddest part about all of this is that the real solution is so simple. Limited Government, expansion of free market principles, reduced tax rates - or better yet the FAIR TAX - and our nation would soar.
But the progressive Social Democrat party knows that -- they know it and they do not want it. They want control much more than they want prosperity.
Those of us who want prosperity for America, have one chance to take control and stop this mad rush to European misery and mediocrity.
Posted March 26, 2010 at 2:14:10 AM
TJS
The US is bankrupt and headed for ruin and debt enslavement.
We need a Constitutional amendment to prohibit deficit spending except for declared war; to limit the federal government to 12% of GDP; and to require government to pay off its debt at a fixed rate of its annual budget (suggest 3% of budget); and to limit the tax which can be laid on an individual (suggest 25%).
Washington DC has proven it cannot be trusted whatsoever. It is time to handcuff them in the Constitution.
Posted March 26, 2010 at 10:56:11 AM
MichaelSSEC
Fiscally disastrous, and deliberately calculated. This is not some blind, naive accident that Obama has blundered America into. This is planned ruin.
These are radical Leftists who view the United States as the cause of every bad thing in the world. To their way of thinking, the world would be much better off if America was far weaker, less influential and less prosperous. If America faced economic ruin, other countries could compete "fairly" with the US for the first time.
Obama and his radical friends consider themselves citizens of the world, so they feel no allegiance to the US. Thus they feel no special compunction against wrecking the country. Can someone think of even one policy of the Obama administration that does not lead us to catastrophe either militarily, economically or politically?
When we can see the country rushing headlong toward a cliff, Obama stomps on the accelerator. Even as his Obamacare fiasco promises to spend us into oblivion, these radicals are ready to pass Cap & Tax, and slap a crippling new set of restrictions on the economy. How does that help America pull out of the recession? It doesn't. And that's the whole point.
Posted March 26, 2010 at 1:51:54 PM
Brian
The missing factor on the Left is a basic understanding of mathematics: the Lowest Common Denominator. Also not factored into the "No Child Left Behind" policy. The only way for everyone to be the "same" is for everyone to be at the bottom. "...all men are created equal" does NOT mean "everybody is the same." To those on the Left who believe America is the problem, you are cordially invited to LEAVE. Has it ever occured to these morons that life without challenge is meaningless? Perhaps, what the rest of the world needs to do is catch up with us, not try to drag us down to their level. There is a damn fine reason why we have the highest standard of living in the industrialized world, and it ain't because of all the freebies the government hands out. I'm sorry, that's not politcally correct thinking, is it? Oh, well, tough s&!t.
Posted March 27, 2010 at 12:52:11 AM
Warren
What this is really about is a dumbing down of the United States. We have a Socialist President who has never told us he loves the United States.
Why should he, his mother didn't, his grandparents didn't, the people he associates with don't. What he says is he wants to change it. His sperm donor father was African so he claims to be black. I am not worried about his black genes, what really bothers me is his white genes. They are dangerous and will lead this country to ruin
Posted March 27, 2010 at 11:46:23 PM
Bernard P. Giroux
The power to tax is the power to destroy. Obama has succeeded in 18 months in undoing what has taken generations to establish. The Tea Party is a small example of how Americans truly feel about the tyranny which exists in the United States government today. The time for a revolt at the ballot box is at hand in November 2010.
Posted March 29, 2010 at 12:57:49 PM
Abu Nudnik
MichaelSSEC above has it exactly right. Obama is holding hands with Obama, a miraculous incarnation of Thelma & Louise in one body, joyously driving the America that deserves to die (I'll bet he loved "Dogtown") into a canyon. Then the chief evil of the world will be defeated. This is how this type "thinks." And to think! I was one of them! at love-ins and all that! The beat goes on, man...
Posted April 5, 2010 at 12:45:16 PM