A Value-Added Tax Won’t Solve the Deficit Crisis
by Brian GarstAs Congress prepares to raise the debt ceiling by $1.8 trillion, there are renewed calls from political elites for a value-added tax in America. The New York Times all but campaigned for the idea while touting it as a possible “cure for deficits.” But a VAT would do nothing to solve our deficit problem. Rather, it would supply new fuel to big government bureaucrats addicted to spending.
Supporters of a VAT mistakenly assume that increasing government revenues will lead to reduced budget deficits. While raising additional revenue may be part of any long term budgetary solution, it is not sufficient by itself – and probably not needed at all. Unless systemic changes are made, there is every reason to believe that additional revenues will simply be used to provide additional entitlements, pork barrel projects, and other wasteful government spending initiatives designed solely to enhance the reelection prospects of politicians. So long as deficit spending provides tangible benefits to the political class, they will continue to run deficits regardless of the amount of revenue raised.
Even in the midst of recession, federal revenues exceeded $2 trillion in fiscal year 2009. Can anyone really argue that $2 trillion is not enough for the federal government to perform the duties outlined in the Constitution?
Much of the spending is on programs that clearly fall outside of constitutional duties, so returning to those principles and limiting the reach of the federal government is an obvious solution. It’s also not likely to happen in the immediate future. While continuing to work toward this goal, there are other solutions we can pursue to bring more immediate payoffs.
Every state in the union except Vermont is legally required, either through their constitution or statutes, to balance the budget. Federal balanced budget amendments were very narrowly defeated in both the 80’s and 90’s. The Tea Party movement might just provide the additional electoral support to make another attempt worthwhile.
If we are successful in forcing Congress to take seriously the need for spending cuts, either by encouraging systemic changes in the budget process or just utilizing electoral pressure in general, then finding places to trim spending should not be difficult. Potential savings abound.
The federal government currently subsidizes the states to an annual tune of $500 billion. These federal grants have exploded in number over the last half century – doubling over just the last two decades from about 400 to over 800 programs – and include money earmarked for everything from education to community development. Medicaid accounts for almost half of the $500 billion. Grants to the states are rarely looked at as a place to find savings, but should be considered prime candidates.
Federal grants have a destructive effect on federalism and encourage waste in state budgets. Medicaid’s dollar matching system, for instance, encourages overspending. And funneling money through Washington D.C. not only adds an unnecessary and costly layer of bureaucracy, but also helps shield the politicians spending the money from those paying the taxes. This makes government less accountable to the people. As grant money often comes with strings, it also erodes state autonomy. Scaling back or even eliminating these programs would not only be a solid first step in restoring fiscal sanity, but is simply good policy.
There are too many productive avenues through which to pursue spending cuts to list them all here. Rather than taxing value – which of course means discouraging its creation – lawmakers need to find where they can trim the fat. The idea that a VAT will lead to reduced budget deficits is a pipe dream. If lawmakers want to raise taxes, they need to first convince us that it is truly necessary – and that means getting serious about reducing the bloat of government.
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62 Comments
Let's give crackheads a way to earn more money, that will solve the crack problem
Government thinking at it's finest
[...] This post was mentioned on Twitter by AZ grassroots, Cody Hanshaw. Cody Hanshaw said: A Value-Added Tax Won’t Solve the Deficit Crisis http://is.gd/5nzbf [...]
Lack of income is not the problem rather poor management of the outgo. No matter where you live or how much you make if you overspend you are in dept. Let's bring back the debtors prison and fill it wth politicians who increase spending. This nation may have a prison overcrowding issue but we will be debt free in 24 months.
Constitutional Amendments seem to be the only way to deal with this
A) Balanced Budget Amendement, maybe with a death penalty to anyone that tries to end run it, 3/4 to over-ride it (to disable the what if type arguments)
B) Flat tax to limit revenue collection schemes
Those two would just about cripple the corrupticians I think, details to order the reductions (the left always threatens to do military, police, firemen, schools first as a scare tactic)
The peoples growing and well placed hatred with the a federal government that feeds its own appetites while telling us to eat cake is prime ground for those kinds of large moves that would set back the progressives for 100 years.
I woudlnt stop their, but man that would be nice to see as a starting point
Its politically impossible to stop deficit spending, no one votes for someone who takes things away, plenty will vote for someone who 'promises' to give them something
Liberty…then wouldn't the only way to stop this corrupt government is by revolution? At some point, the price for this kind of largess must be paid.
More taxes won't help a thing. You don't solve money problems by spending more money. You solve money problems by altering your behavior..ie spending habits!!
but until this country learns that our liberty is being stolen one tax, one regulation, one manipulation at a time and all in the name of the public good or is it for government good or is it for party good, we will lose the promise of America.
You raise a tax/regulation some one will lose a job and thus a home and child will go cold and hungry. How much freedom do you have when your cold, broke, and hungry?
[...] You can read the rest here. [...]
It is all about power and statism. They will continue to bleed us dry unless they are voted out.
It is all about power and statism. They will continue to bleed us dry unless they are voted out.
I can't say it enough!! Fair Tax!! Fair Tax!! Fair Tax!!!
like any addict when you take away what they feed on they go nuts, so if you take away what feeds the govt. and the whole political class(tax money) i imagine there will be a whole lot of knashing of teeth, but we will never know unless somehow the drug is taken away, hell the whole country is broke and were still using our credit card, its quite pathetic, in America your worth is determined by how much money you can get someone to lend you. My main question is how can a rich country(U.S.) be in debt to a poor country(China), its like a bum on the street is the creditor for a guy rollin down the road in a lexus, how this will end up good i dont know
So true Liberty so true and it's so unfortunate. I'm remembering people in Detroit, Michigan a liberal progressive system lining up for free money. A reporter was asking people what they were here for and their reply was money, and then he asked where does the money come from. You know what the answer was? Obama, Obama is going to give us the money. So the reporter asked well where does Obama get the money, Answer, I don't know I guess his slush fund. Moral of my story….Obama promised Hope and Change but not once did he tell us what that was. If any Republican President promised that at this point, almost a year now what does anyone think the country would think. Pathetic!!!
The Conservative Edge
So true Liberty so true and it's so unfortunate. I'm remembering people in Detroit, Michigan a liberal progressive system lining up for free money. A reporter was asking people what they were here for and their reply was money, and then he asked where does the money come from. You know what the answer was? Obama, Obama is going to give us the money. So the reporter asked well where does Obama get the money, Answer, I don't know I guess his slush fund. Moral of my story….Obama promised Hope and Change but not once did he tell us what that was. If any Republican President promised that at this point, almost a year now what does anyone think the country would think. Pathetic!!!
The Conservative Edge
people who run to the govt. to solve their problems are the reason taxes go up
the problem is no one votes for someone who takes things away, they vote for people who appear to give them things
everyone has their own definition of what 'fair' is…
Kaiser Permanente – Obama's new self-described german/latin term for President?
Some people do this more than others, the permanent hand-out-class is unreachable, the dabblers I think are.
For instance the middle class, howls if you mention removing the mortgage tax credit (regardless of the fact that they fair better, it's knee jerk)
I think that large majorities in that camp that still work for a living are getting fed up with the job killing, corruption rewarding, government bloating Obama administration and his polls are showing it.
You are right though, framing is critical, what you give them is jobs and relief through fair taxation, elimination of corruption etc. I think the anger is high enough, and will continue to swell to the point where big things can be accomplished that may not have been doable under any sane Administration.
At least I hope so.
then you have the burreaucratic class who only vote their self interest, which everyone should do, and that self interest is more govt.. Anyone who gets their revenue from govt. will vote for more govt.. We are close to the point where 50% of registered voters are dependent on the govt. for their revenue in one form or another, and if heath care passes the whole medical services industry, probably 20% of the economy will become govt. employees, the end result will be game over freedom IMHO
Well of course, but considering the fact that I'm talking about actual legislation, your platitude leaves little room for comprehension.
To many use the government to make money..
i did a platitude and didnt even mean to, do your people ever get confused with the flat taxers? someone explaided to me once how the flat tax was bogus and it was very persuasive argument but i forgot the logic of it all, aint that life for ya, whats this fair tax legislation you speak of?…
The New York Times all but campaigned for the idea
Presumably, since the NY Times has no value, it would not be taxes.
The best explanation would be http://www.fairtax.org. Yes, the Fair Tax is often mistaken for the flat tax. The biggest diff b/w the two is the Flat tax still has an income tax and just simplifies the massive 67,000 page tax code we are all slaves to. The Fair TAx is simply one consumption tax. No income, payroll, property, death, gift or any other outrageous tax I can think of. At this very moment, we already pay 22-26% embedded taxes on the goods we purchase before any sales taxes therefore no prices would change. You would get your whole paycheck (unless the state you are in doesn't follow the federal tax, so a state income tax would be there) plus a prebate for your necessities depending on how many people are in your family. I could talk about this all day. LOL It really is a too-good-to-believe idea, but the more I read about it the more I am convinced this is the best thing for the people of this country. If you have more questions please do not hesitate to ask.
BTW, the site I gave you has a link to the actual legislation in congress, if you'd rather read from th ehorses mouth, so to speak.
BTW, I apologize for being combative. I should have simply asked if yu were being glib. I get defensive about the Fair Tax b/c so many people think I'm out of my gourd without having any knowledge about what I'm talking about and not letting me explain it to them.
you make flat tax interesting, i will pursue it further, it all seems so complicated, i'm kind of neanderthal about it, in a just destroy the whole thing kind of male perspective way, like i said someone explained how flat tax was not so great and i forgot the whole rationale of the argument against it, keep up the good fight!
i like combative
I am confused about what your are saying. (No, I am not arguing with you…just trying to figure out what you mean)
First, you said "Its politically impossible to stop deficit spending"
…then you said, "if you take away what feeds the govt. and the whole political class(tax money) i imagine there will be a whole lot of knashing of teeth, but we will never know unless somehow the drug is taken away"
If it is "politically impossible" to take away "what feeds the govt.", then what other options do we have?
Respectfully,
Cnsrvtv
Talk about not raising taxes on the middle class — those earning under $250k!! This would be a huge blow to the economy and to working families.
Does anyone believe that if a VAT tax is imposed, that state sales taxes will cease to exist? Or, that state or federal income tax will be reduced? Of course not.
This will greatly increase the tax burden and cost of living for the very Americans that can least afford it. It's time to be fiscally responsible and force Congress to save a dollar for every dollar they spend — as President Obama promised to do.
The so called Rich are the easiest targets. They pay most of the taxes in this country. When they are taxed too much, our "golden geese" will either leave the country or become new members of the middle class. Then the only source of money will be the printing presses. I figure the more rich people in the country, the better off we will all be. CUT TAXES!
So, the always end up equally poor and miserable.
Equality, how noble a concept. I wonder how much longer until they run out of other people's money? The banks are tottering on the edge and Obama is systematically destroying all other industries that create any wealth. It doesn't look so good right now. And the next election is how far away?
They did in Virginia and New Jersey. And if the useless RNC had backed the conservative over Didi Scuzzi, we'd have won that seat in New York too!
The people are tired of it, it's the mindless system on both sides in DC that need to be spit out.
Yes, but he can't shut down the military until they withdraw from everyplace, and he's racing around to apologize as fast as he can now. But don't worry, he's working on it.
I think he's jealous of the peace dividend Clinton had and never stops to think about the damage it caused us.
add to that, no bill passed is more than 20 pages long, I believe the Founding Fathers had all the founding document in 18 pages, then there is never a reason not to have read a bill.
Right on the "Fair Tax."
I would be insanity to give the Washington criminals more money to spend. In our present system that’s all a VAT would accomplish. Real change would come in the “Fair Tax.”
I agree it's getting close to unreversible which is why I think it's at a critical stage, seems like you do as well.
But IMHO I think regardless of the actual numbers the "effective" ratio is more like 40/60 (I Just mean that out of that close to 50& slice 10%++ don't realize they are on the dole and are still reachable ) and with the way Obama is going it might be more like 30/70 (he seems to be able to piss everyone off)
We agree on the major issue here I believe, that if something doesnt change the Republic is done and hello world government and equalized-misery indexing, we need big steps or else we are just putting off the arrival time, not the destination.
Yeah that's a 3rd one for sure, I would even up it to 100
I would also say like to see single issue (no earmarks) and budget same
Those are 3 nails in the coffin of redistribution collapse header our way, I just dont know how much you can do at once, but with B-Daddy in charge it's quite possible he might screw up enough to force the issue as early as 2010 if keeps turing up the heat.
Can we find enough people to sign on to those (dont know but it's possible) and 3/4 of the states would still have to go along and that's a hard one, but if they didnt and things got worse (I think they would, Obama woudl be offended and revenge crazt ) it would be set and match for 2012
Precisely, if the bills are limited to a given amount (20 or 100 pages), it would put an end to the legal jargon and the earmarks hidden presently in the 2,000 pages bills that are all to common now, just go to KISS bills, (keep it simple, stupid).
That's because all politicians are OPM (other peoples money) addicts, VAT s are a Euro idea and they can keep it, a true 'fair tax' is a flat tax, that brings in money from the underground economy as much as the visible economy.
I don't see this here so let me state it.
VAT is a horrific idea.
VAT would be a huge blow to freedom in this country.
Ronald Reagan once said that taxes should hurt. You're darn right they should because otherwise they'll suck them out of you until you're broke. VAT was one of the major steps on the road to the socialist hell that Britain is today.
VAT is equivalent to rendering you blind so that a thief can take your pocketbook without your noticing.
yet the govt. has no money, and creates no wealth and yet people still make money from it, what a business model, have no money and create no weath can youo do this with a private sector company? as with all socialist systems the consumer gets left holding the bag, contrary to true capitalism, which is difned as- when the consumer wins this is capitalism.
he is "quite pathetic"
Its all about the money, globally we are a debtor nation, especially to China, and yet they are a very poor country, so how is a rich man in debt to a poor man? How is the govt. gonna pay China back? We have no money. Its gonna be tough politics for any politician to say…"well we have to raise taxes to pay china back" I dont think a politician will ever say that especially when our political culture is about giving things away, there is rarely a call for sacrifice and if there is the politician will either never be voted into office or wont stay there long, someone will always come along and offer an easier way. I believe human nature is ruled by taking the path of least resistance. what do you think Cnsrvtv…
Employment is the only method of growing revenue. VAT will further harm the American Manufacturing. FairTax will have the effect of creating so many jobs, we will have inflation based on employee income for once. Not since the Federal Reserve appeared, have we experienced this. FairTax please.
As to a balanced budget, it is not necessary, not if we would have a Constitutional Budget. Spending at the federal level would reduce dramatically, taking back all the looted taxes to the States to manage their own affair. I never could understand how the Federal tax would be more then the State tax. Today, the equivalent to replace our production tax by a consumption tax is at least 23%. It should be around 2 %. A State with FairTAx under the Federal Gov. Constitutional budget would rise, no would remain the same or drop as domestic production would flourish.
What was the good old days will not be able to stand up to the prosperity if we FairTaxed and all became Federalist=went by the Constitution.
I had only a small definition of the flat tax. The fair Tax is not complicated. We have been conditioned to think tax issues shoudl be complicated, and the Fair TAx isn't at all once you get the core information. Think about it. With the Fair TAx, not only will those that pay taxes now be involved, but we would get taxes from tourists, illegals, and anyone living in shadow economies. As Huckabee said in one of the primary debates, we'll be able to collect taxes from the pimps and the hoes. Not to mention the 12 trillion in off-shore tax havens will be free to return to the states.
What happens to "LIBERTY" when everyone born must pay a tax??? What the Congress, the Senate, and the Administration is doing clearly is described as being Treason in our constitution, which Senator Hatch has also confirmed! DO YOU REALLY THINK THAT THERE CAN BE ANOTHER ELECTION? This one is GOING, GOING, GONE once said the voice of the great Mel Allen of the Yankees!
Victor, the darkness of the hour leads one to assume so, but the fact that we still have our second amendment gives pause to those who would deal the final blow. I am of the opinion, that the 2010 eleciton is our WaterLoo. We must elect and be sure someone of this caliber is on the primary ballot, Federalists=support of fundamental Constitutional conduct.
Great article. Exactly how I see things.
In financially tough times I have to cut/watch my spending… not increase it. Our Gov has INCREWASED it's spending and has increased it's pay to gov employees during the recession, while all non-gov companies cut employees and don't increase pay. Our Government lives in La-La land!
The most obsurd item is NObama admitting there's BILLIONS of wasteful spending in Medicare, yet he does NOTHING to fix it.
No tax will solve the deficit. What will solve the deficit is to follow Reagan's approach to the economy as well as to stop finding new ways to spend money.
Actually, it was worse than that – "I don't know – from his STASH". Obama Money! That audio needs to be replayed everywhere. More evidence that everyone should have to take a test to vote!
It boggles my mind that anyone other than politicians would consider any added taxes a good idea to reduce the deficit or improve anything. The amount of waste and fraud is absolutely, positively, REDICULOUS. Until that is addressed and stopped (by any means possible as being discussed here) the idea of spending more, taxing more, is beyond stupid – it is the continued enslavement of the american people. Period.
How about we get the below people to pay their taxes just like everyone else:
http://www.wtop.com/docs/FERDI2008.xls
The very best thing about the FairTax is that it makes the cost of the federal government visible on every receipt and connects government spending to personal earnings. That connection is hidden today through payroll withholding and payroll taxes. Today, many believe the trillions spent don't come out of their paychecks but is "free money". The FairTax will create consumer pressure to reduce government spending (of our money!). The second best thing is that we take home our whole paycheck. The third best thing is that trillions of dollars of offshore investment will come here once we eliminate the corporate tax–that means jobs and a lot more stimulus than we get by borrowing against our kids' future paychecks. The fourth best thing is that illegal immigrants and the underground economy become taxpayers as consumers, allowing everyone to pay less of the total share. The frosting on top? Congress doesn't get to sell off pieces of the tax code anymore and the "Made in America" label roars back to life when the self-serving political class gets out of the way.
Oh yeah, here's another real good one–April 15th becomes just another spring day.
The current legislators will never promote or pass the Fiar Tax bill because it will deplete them of all their extra-constitutional powers. Lobbyists would be neutered. I'm all for it, but don't see it happening in my lifetime and I'm only 45.
We need a JUBILEE amendment to the constitution. Ancient Israel had such a law that automatically forgave/erased all existing debt every 50th year. This law kept the nation (and individual citizens) free of accumulated debt over time. People were forced , by necessity, to keep their financial "affairs" straight and not be caught at JUBILEE time with a lot of debt still hanging.
What do you mean by "…not be caught with a lot of debt hanging"? Didn't you say in your second sentence that "…Jubilee…erased all debts…" If you were a debtor owing a lot of debt you'd be jumping for joy. On the other hand if you were a greedy creditor – Tough Luck To You Charlie! >> "People were forced , by necessity, to keep their financial "affairs" straight and not be caught at JUBILEE time with a lot of debt still hanging." << That statement doesn't make any sense at all. It just so happened that it was a common practice of kings assuming the throne in ancient times to forgive all debts public and private, which made them very popular at first, until they started raising taxes to pay for their follies. Israel adopted this practice after the ancient tribes before them. Currently the concept of the Jubilee has been proposed by the economist Dr. Michael Hudson. Michael Hudson has some interesting ideas on our present financial dilemma. Check him out on YouTube.
P.S. " The Debtor is a Slave to the Lender " – Hence the need for a Jubilee Year to release debtors from slavery.
Did you ever hear of debtors prisons or indentured servants? Well these evil practices were quite common, even here in America, until bancruptcy laws were introduced to relieve people from the evil of perpetual debt.
"The Power To Tax Is The Power To Destroy…"
– John Marshall – Chief Justice of the U.S. Supreme Court
* Your Quite Right *
Legislators will never pass a "Fiar Tax" (or did you mean Fair Tax). And why is this? Because, there is NO such thing as a Fair Tax. And why is this? – Read further >>>
Websters Dictionary – TAX
- noun
1. a sum of money Demanded by a government…
2. a Burdensome charge, obligation, duty, or Demand.
- verb
3. (of a government)
a. to Demand a tax from (a person, business, etc.).
b. to Demand a tax…
4. to Lay a Burden on; make Serious Demands on: to Tax One's Resources.
Now, pray tell, what is Fair about Taxes?
In addition, if the so called "Fair Tax" was passed, what makes you think Congress would repeal current tax schemes that we are presently subject to. That would never happen. Witness our average Jane and Joe of Main St. tightening their financial belts out of necessity, while their dutiful U.S. State and Federal legislator servants(?) spend to infinity. Since we can't afford to spend something we don't have, they're doing it for us. Remember that funny man – Ross Perot – of "that giant sucking sound" fame. Well he didn't realize at the time it wasn't NAFTA that would destroy us but, rather the Government who would bleed us to death through spending.