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October 16, 2010

The Value Added Tax

The value added tax is back in the news and worse, in the few days since Mitch Daniel's suggestion that the United States adopt a VAT, I'm seeing it proposed more and more from (so-called?) conservative commentators. Often, they pair a VAT with a flat income tax and suggest replacing the existing federal income tax scheme.

It should go without saying that the VAT is an exceptionally bad idea, whether it's paired with a flat tax or a fair tax or any other tax and whether it replaces the federal income tax or not. Whatever its merits, they are outweighed by its key features: the VAT obscures for the taxpayer just how much money is being sucked up by the government; it is prone to Congressional abuse; and it is, in the words of economists, "efficient."

Yes, you can put VAT on each and every sales receipt. But unless the taxpayer keeps and diligently tallies every receipt, he will have no idea what he's ended up handing over to Uncle Sam.

This feature of the VAT is a tax-and-spend liberal's wet dream because it keeps the taxpayer-voter in ignorance of how much of his property the government is appropriating over time. Even under the current complicated income tax scheme, the taxpayer-voter has a pretty good idea of how much of his annual income gets sent off to Washington, D.C. And he can then make reasonable predictions and demands and votes when Congress starts fiddling with tax rates. But for the average American, if Congress were to adjust a VAT, the question "how much does this affect me or my business" becomes difficult to answer. Again, unless the taxpayer-voter has been keeping track of his consumption.

And there, too, a VAT gives Congress even greater means to target disfavored industries and individuals. Progressive nannies can push for a higher VAT on soda and fast food. Social conservatives can push for a higher VAT on...er, morally questionable commerce. Other major targets: the oil industry (after all, they should pay more for being Gaia-raping capitalists); the pharmaceutical industry (it's for the children, somehow); and, without a doubt, Big Tobacco (for obvious reasons).

Economists laud the VAT because it is a "more efficient" means of collecting taxes. As a conservative, hell as a taxpayer, I am not in favor of more efficiency in letting the government take what's mine. I acknowledge the need for a government and the obvious necessity of paying for one. But simultaneous efficiency and obscurity are not on the top of my list for features of a tax scheme. I want what taxes I'm paying to be SCREAMINGLY obvious. And I want to be able to get that information any time I want, but particularly when I'm asked to elect or reelect these jokers in Congress. (In fact, it is for this reason that I support moving Tax Day from April 15 to the first Monday in November. Let's put Tax Day nearer to Election Day.)

In short, the VAT is exactly the type of tax scheme that conservatives shouldn't want. And pairing it with a flat income tax does not alter its key features, that is, it's patent deficiencies. It's disappointing to see conservatives using the Obama-spawned budget crisis as an excuse to propose a fundamentally awful tax scheme. Shame on them.


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posted by Gabriel Malor at 03:01 PM

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