More Arguments against Obama’s Dream Tax
by Dan MitchellThe biggest long-term threat to fiscal responsibility is a value-added tax, as I’ve explained here, here, here, here, and here. So I’m delighted to see a growing amount of research showing that a VAT is bad news.
Jim Powell has an excellent column at Investor’s Business Daily that makes a rather obvious point about the wisdom (or lack thereof) of copying the tax policy of nations that are teetering on the edge of fiscal collapse (this cartoon has the same message in a more amusing fashion).
Drums are beating in Washington for a value-added tax in addition to the “stimulus” taxes, health care taxes, energy taxes and other taxes President Obama has imposed and wants to impose on hard-pressed taxpayers. Supposedly a value-added tax is a magic elixir for curing budget deficits and excessive debt. Quack remedy would be more like it. If it worked, you’d observe that countries with a VAT had budget surpluses and no debt problems. But almost every country that has a VAT is plagued with budget deficits and excessive debt. … No surprise that the worst financial basket cases all have a VAT. Iceland has the highest VAT rates, but this didn’t prevent its financial crisis and the near bankruptcy of its government. Italy’s VAT rates are almost as high, and its debt exceeds its GDP. Financial crises are looming in Spain and Portugal, and of course they have a VAT. Greece has a VAT, too, and when politicians ran out of money to pay government employees for more than a year’s worth of work every year, they rioted in the streets. Great Britain has a VAT, and its government finances are in the worst shape since World War II — its budget deficit is expected to be bigger than that of Greece. Moreover, the OECD has acknowledged that “(VAT) tax and transfer wedges have discouraged firms from offering employment and individuals from taking it, reduced employment and increased inequality.”
And a new study by Douglas Holtz-Eakin and Cameron Smith finds evidence that a VAT would lead to bigger government.
VATs provide a significant amount of revenue. …But do these significant revenues cause government spending to grow larger? Or is it the case that adoption of a VAT is evidence of the desire for a larger government so that the causal arrow runs from a taste for Leviathan to a VAT, and not the reverse? …we find a statistically significant dynamic relationship between the rate of VAT taxation and the size of government. Although no single study is definitive, this is the first rigorous evidence that a VAT causes government to grow larger. …countries that adopted a VAT did in fact experience, on average, a 29 percent increase in the size of government. …The estimated coefficient of 0.262 indicates that adopting a VAT is associated with larger government. This estimate is statistically significant. …our results shift the burden of proof to those who deny that VATs fuel increases in the size of the public sector.
This study jumps into a long-running chicken-or-egg debate in the academic literature about whether higher taxes lead to higher spending or whether higher spending leads to higher taxes. This causality debate is interesting, but I’m not sure it really matters. A VAT is a terrible idea if it triggers bigger government, and a VAT is a bad idea if it merely finances bigger government. But I suspect this study is correct. The key thing to remember is that Milton Friedman was right when he warned that “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.” This means that a VAT will allow more government spending and no reduction in deficits and debt, which is exactly what we see in Europe (and as Jim Powell noted in his column). Last but not least, this video summarizes the best arguments against a VAT.
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122 Comments
Barry sure is a Dreamer!
Dream on Golden Child, you have only two years left, until you're hammering nails, and building Habitat for Humanity huts with Jimmah Carter…….
Lets see, they want a sales tax, an income tax, cooperate tax, energy tax, death tax, a value added tax, excise tax and a just because we can tax……what do we use to live on?
Jimmy don't actually swing a hammer, he shows up, smiles then has someone buy him lunch at the club, then he goes home.
Or weaving baskets in Kenya.
The crumbs that the government leave for you.
Hahaha. I just used the "Habitat for Humanity" line in the last thread. How funny that we both came up with the same imagery for the "dear leader."
Obama, Pelosi, Reid and the rest of the progressive marxist (redundant I know) DO NOT CARE!
They are ALL wanting to "fundamentally transform" our country and are WILLING to burn the ship while miles out at sea. In the meantime, we must get the matches away from these unqualified stewards of the ship as they are ready and willing to sink us all.
NOVEMBER is the start!
"A true revolution of values will soon look uneasily on the glaring contrast of poverty and wealth. With righteous indignation, it will look across the seas and see individual capitalists of the West investing huge sums of money in Asia, Africa and South America, only to take the profits out with no concern for the social betterment of the countries, and say: "This is not just.""
"A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death".
"There must be a better distribution of wealth, and maybe America must move toward a democratic socialism."
MLK jr
Rather than help fix the economy, they want to add another tax on finished product. Now that makes really good sense only if one wishes to drive the economy further down the bottomless pit. Yep, our lawmakers sure are smart. Not so much, IMHO. They are just greedy toddlers wanting to feather their own diapers and continue to spend recklessly. Nov where are you?
There is no end to the economic destruction of a country when marxists are in charge! Once we're taxed into poverty, they install FULL Dictatorship. Oops- only one problem, America has a better plan- YOU'RE ALL FIRED!!
and wait for the subpoenas at home!
"what do we use to live on?"
Welfare.
I like my neighbors house, I like my neighbors clothes, I like my neighbors car. Welfare state and welfare corporations, all like little birdies in a nest screaming me me me, give me what my neighbor has, take it from my neighbor and give unto me.
Not to change the topic, but the CURRENT hostage crisis in Maryland, at the Discovery Channel?
Here is the guy's online "Manifesto": http://mypetjawa.mu.nu/archives/203779.php
It appears Mr. Lee is insane…………
I pray that some day you will come out of your coma.
"……….So I’m delighted to see a growing amount of research showing that a VAT is bad,………"
WHAT THE F__K,….!!!!!!!!!!
sometimes I wonder how many times does a person have to get kicked in the mouth,…..
to realize that being kicked in the mouth,….
is bad for you.
Ahhh but maybe I'm a tad hasty so,……yea,..
let's do a little more "RESEARCH"
You're an idiot. Wealth is not distributed, it's created.
Whilst we're at it, how about a little more research into the Global Warming "Science" thingey?
If you tax value, no one will add value to avoid the tax. If nothing of value is created…
"How Did Democrats Get Here?" . . . New York Times Headline . . . We figured out you are Communists and Socialist out to destroy the United States of America . . . Would you like me to draw you a picture?
I hope nobody gets hurt or killed……The media will spin this as a right winger then they will be silent when it is discovered it is another leftist kook.
Speaking of taxes, us super rich(sarc) newly commissioned Floridians get to pay 400 dollars a car just to change our license plates. Welcome to Florida!
You want social justice? That's a religion, and the gov't shouldn't get involved.
Socialism has worked so well everywhere it's been tried.
We will release the blacks and Illegals fom Welfare slavery!
We will release the poor, and the blacks and Illegals from Welfare slavery!
You are one confused lib….
Next time you attempt to quote anyone concerning your dream world of sunshine and lollipops, you need to contrast them with the Constitution. It is apparent that you have not read, paid close attention, don't understand or just hate it.
40% of the enumerated powers of Congress are to create, supply and maintain a MILITARY! You would think that someone supposedly as "smart" as Obama would figure this out, put two + two together and abide by the rule of law.
Why would you give in to a Marxist? You should realize that any ethnic/social minorities are always the first to be “disposed” of during a revolution. Obama is willing, along with Ayers and Co., to dispose of 25 million people in order to usher in their panacea. Are you going to be one doing the disposing? Or will you be on to help dig the trenches for those being disposed?
The EPA is going to require stickers that show green house gas emissions, but EVs are not required to show emissions from the utility plant they are plugged into, instead the EVs will show how much GHG emissions they would have had using gasoline….EVs are actually dirtier than gasoline in most cases, when using a coal power plant as the source of the charge.
Yet you just ignored the money wasted on welfare, environmental, and entitlement programs, that all still are not paid for. Not to mention, the military defence budget is about 20-30% of the total government budget.
You also realize, alot of our national debt is based on the programs I said earlier and all our government does is just tax and spend more, capitalism has nothing to do with that. And without capitalism, we wouldnt have the freedoms, tech, and information we have now. If not, we all would probably be usings Commadore 64s still and no internet as well as almost no industry.
So LJ, what is your point besides some quotes. Do you not have an opinion of your own.
Hey, that's some interesting reading. I wonder if obama would consider this guy for another czar position. Or perhaps a special assistant to John Holdren at the Office of Science and Technology Policy. He seems to be cut from the same cloth.
If Obamacare is allowed to continue, a VAT must follow. Now, find a dill hole who voted for this doofus and give em a swift kick where the sun don't shine. Thank you for your kind attention.
Well, he is like, a hundred years old, no?
Little Barry's dream — Enslave America with a debt that can never be repaid. America's chickens are coming home to roost — To quote a line from his preacher's sermon.
You get to go to the back of the line for your Obamabucks.
He has never done anything constructive in his life up til now, do you really believe he will when he is out of office, he will just take his teleprompter and give speeches to all those liberals like himself or if he did actually join the Habitat for Humanity, it would be to build Mosques.
Who is John Galt?
Come to think about it, wouldnt it be easier to name the things we arent getting taxed on.
The Value Added Tax won't help us with our current problems. In point of fact, the imposition of this new tax will retard economic growth across the board as it penalizes both consumption and investment at every level of the economy.
The issue at hand is how are we to pay for our penchant for unlimited fiscal spending? Can we reasonably expect to pay for our bills using taxation?
Allow me to make a case for a new revolution in economics that I think you will be sure to like. The economic philosophy is agreeably simple, the concepts are logical and easily commendable to your good sense of propriety and the math is in terms everyone can readily grasp.
As of now we have approximately $107 trillion in unfunded liabilities under current law. What this means is that to carry out our obligations due under current law (not including Obamacare!) we have to come with $107 trillion in addition to the outlays and receipts we have today. The question is: can you expect taxation to pay for these costs?
Let's do a simple analysis.
Currently, our economic output is around $14 trillion (more or less), so if we had a 100% Value Added Tax, that means every cent of output would be taxed – all your money and all money earned by businesses would be turned over to the government and all economic returns from investments in our economy would be turned over to the government – we would have around $10 trillion available each year to pay off these liabilities. It would take us about 11 years to do so (more or less – boxcar figures to keep it simple and understandable).
That's "if" you believe:
(i) that Americans can live on nothing for 11 years; and
(ii) that the economy would not completely disintegrate as a result of 100% of output being confiscated; and
(iii) that government wouldn't spend even more of the money they received and then some more to boot.
If you think that any one of these scenarios is unlikely, then you have answered the question: taxation CANNOT pay for our bills and that means we have to find a replacement for it that will pay our bills because we CANNOT reasonably expect spending to go down by our own choice. Spending only decreases when there is no money to spend. We all know that.
Believe it or not, there isn't a lot of mystery in how government is funded even though many people are confused by this point. They think government has secret stashes of money and some money appears by fiat or vote. It really doesn't work that way. Government is a stakeholder in our economy and as a stakeholder it is bound by the same restrictions that apply to businesses, charities, households and individuals (the other stakeholders in our economy). So that means government gets money the same ways you do and there are only three: (i) it can steal it; and/or (ii) it can get it as a gift; and/or (iii) it can earn it. There are no other ways (people ask me about borrowing, but if you borrow and pay it back you earned it and if you don't, then it is either a gift or theft).
When government steals it calls its crime "taxation" but it is still stealing and stealing is a limited activity – you can only do so much of it before you run out of people to steal from. The same is true here as we see with the $107 trillion example – government will never be able to pay the debts with taxes and that means we are doomed if we don't do something else.
We could finance government with gifts, but it would have to be the size of the local village fire department or it wouldn't work. Strike gifts off you list too.
That leaves earning it and this is the last and only choice so you have to make this work. We know government doesn't earn anything, so we have to look at investing (you earn money by working and by investing) and investing is the way to go because it is unlimited in nature and it can be structured to be non-inflationary.
There you have it: a perfect little solution. We stop taxing ourselves into poverty and invest our way into prosperity. The investment-income method is used today already, we just do it on such a small scale and in such stupid ways that it creates more problems than it solves. Time to change all that and change our future too. That change won't happen playing tax rates and goofy tomfoolery like the VAT – that will only make your current suffering a whole lot worse than it already is and you don't need to be an economist to understand that one.
"it would be to build Mosques"
So what will we call that? "Habitat for Inhumanity?"
You reminded me of a joke I heard from an old carpenter. One of the carpenter's apprentices kept reaching into his pouch and every other time he drew a nail out, he would throw it away. When asked why he replied that the head was on the wrong end.
Sounds like the definition of government work
I just did. It is a very short list.
What babbling!! Dude your melting down, get help now.
Obama's dreams are sick. A marxist snuck into The People's House. Now he will be leaving with his bunch of Dictator Radical comrades. Come back after you get the subpoenas for Abuse of Power,Failure to uphold The Constitution,treason, Crimes against a Nation, and Deriliction of Duty. Then move to Cuba!
He'll be throwing a lot of nails away, 'cause they've got the head on the wrong end…..
President Obama's new "Cash for Crappers" Program will get the economy turned around with green (or brown) jobs. SHOCKING story is at:
http://spnheadlines.blogspot.com/2010/03/obama-an...
Peace!
Repeal the 16th Amendment and replace the tax code with the “Fair Tax.”
LJ, I got one for you, especially that fits that last quote.
If I am poor and your rich, and I say to give me your money, then that would be considered stealing/robbery. Now If the government comes in and takes your money and gives it to me, then its called redistribution of wealth.
So tell me LJ, do you really want to support that system, and if so, why?
Glenn was right, this praying thing rocks….
Please don't let that man-boy near power tools — he can't even operate an umbrella!
I pray somebody beats him senseless and he goes into a coma…..
The EPA is writing the regs as I post. They're overstepping their bounds to use that money to fill a bunch of pockets and suck more money from taxpayers. If they can't regulate by law, they're are going to do it by fiat. Same, same the FCC. Just ponder who is rewarded if this form of cap and tax goes forward.
He's one of those freaking Malthusians, like Soros….
"Recession is when your neighbor loses his job. Depression is when you lose yours. And recovery is when Jimmy Carter loses his."
(During 1980 presidential campaign)
/Ronald Reagan
He gets them from his stash….
Ronnie was the man!
Nope, he just another example of the progressives extreme fringe.
Amen!!
StanH, I'm terrified of what "Fair Tax" would be interpreted to mean.
If you wish to live in a socialist country, by all means move to one I will pay your plane fare. You WILL NOT move America toward socialism and if you want a bettter distribution of wealth start with your own wealth. When you have given everything you own and all your salary to someone who chooses to sit home on the couch with their hand out then you may once again call for a better distribution of wealth. You are out of gas here, go quote your progressive clap trap on msnbc.
Oh the irony. Your policies are creating for the first time in US history a reduced standard of living for the next generation, record levels of unemployment with an even bigger wave of lay offs coming in the future, and a greater rich-poor gap. Yet here you have these quotes that defy everything the current administration is doing. You gotta keep those poor people poor, otherwise no one would vote for you. Then, any time someone does succeeed, you have to attack them and call them such nice things as Uncle Tom, etc. (you all don't even know what that term means). Idiocy on steroids, that's liberalism
By the way, what is your means to achieve these quotes? Theft of another's property? Reduce taxes and regulations to give people incentives to become entrepreneurs and achieve their own success? (Sorry, I know you all want something for absolutely nothing. You prefer not to earn something, but rather, take it forcibly from another, then claim it's "justice". Sincewhen did theft become "just"?)
Any Union carpenter would tell you that the nails he threw away were for the other side of the house…
People already are losing their entrepreneurial spirit meaning that our long term prospects for achieving economic greateness once again are diminishing. Yet the dems think doubling up on taxes will be an incentive to start a business? How dumb are these people?
http://www.csmonitor.com/Business/The-Entrepreneu...
It doesn't matter how bad something is, they want it just to want it and then claim that shoving it down your throat is a victory.
Well, as proposed by the fair tax advocates, it would be great.
How about Flat Tax only. No room for interpretaon. 15% of salary.
With the Fair Tax. they can manipulate it easier. Also the best part of Flat is ALL OTHER TAXES ARE DSBANDED. Repubs & Conservativs will go for it. The Communists, not so mch. They want all eight Taxes on U.S. PLUS the V.A.T., to drive U.S. nto poverty, therebye we are all Welfare slaves forever!
osama in his speech last night said we had spent over a trillion dollars on the Iraq war. Hell he spent almost that much on bailouts last year. At least we did something in Iraq…all hes done is delay the broke unions and overpaid government workers from facing the truth this year. It will almost be justice to see them sinking when Congress won't bail them out anymore… its coming trolls!!!!
Welfare
I should have read the replies first
It makes no difference if stupid statements and ideas come from a man with the rightly earned stature that MLKjr has, they still are stupid statements and not founded in reality.
Neither does quoting these same statements as if they are brilliant pieces of genius coming from heaven on high bring one to any higher level of discourse.
End of the day they are still stupid ideas and totally oblivious to the realities of the world and the times they have been tried…………over and over and over; and failed over and over and over.
"Habitat for Inhumanity?"
Priceless! Kudos!
The governments teet.
That is the funniest thing I have heard all day!
I thought he was one of AlGore's minions… Or one of Pelosi's staffers…
But I do pray that all the hostages get out ok, and theSniper's aim is REALLY good…
Thank you again Al Gore
The gift that keeps on giving
Hey just in they shot him and have him
If nothing of value is created…
…Progressive utopia occurs?
It depends upon your definition of "live". If by "live" you mean support yourself and your family, well, step into your nearest welfare office. If by "live" you mean actually earning a decent wage and *gasp* making money, then you sir, you can go straight to hell. You obviously don't belong in his Amerika.
We really need to add more cost to our products–higher cost means fewer exports except for jobs exported overseas. They just get dumber and dumber–ask the Europeans.
Why tax productivity?
And why leave the intrusive mechanism of the IRS in place – why should the Feds know how much you earn?
The Fair Tax taxes consumption. It does NOT require the Federales to gather any information about you (beyond the address to which they send your "pre-bate" check ).
Too true. A liberal's idea of fair is socialism.
He never did help build, at least when the cameras were turned off.
The gunman got his social justice….he died.
Yeah, it's like I was writing everywhere I could the day Obama met with the Russian president, I asked if they were talking about Russias flat rate tax and no capital gains tax at all!
They would like to install a high-velocity toilet that sucket the money out of your pants everytime you used the restroom…the money would be shunted to the IRS via specially plumbed pipes…The IRS will continue to give citizens of the USA even more s**t, now that more of it will be flowing through its branch offices.
Double Amen!!
They did the flat tax in '86! With the 16th amendment in place, it simply grew back. You want to change Washington, we must remove their play toy, the tax code. This would reduce K-Street to nothing as well.
sounds fair.
Read the Fair Tax book, and easy one night read. It’s simply brilliant, and would render progressive Washington impotent. If we want Washington to have fiscal constraint we must remove their play toy, the US Tax Code. Radical yes, but brother look around, we’re in radical times.
I'm for it.
Thou shalt not covet.
I guess they forget about that one.
Given his ravings about human parasites, I'm glad to see that finally we got a leftist to attempt to lead by example.
The big thing we need to do is cut the needless overhead. We don't want to price ourselves out of business. The real problem is all the regulations and all of the taxes. And of course a bloated overpaid government coupled with unions that cant afford to pay the salaries and retirements they promise.
And end NAFTA!!!!
If nothing of value is created, we begin to resemble Africa where all the natural resources are sent to places where they will add value.
""There must be a better distribution of wealth, and maybe America must move toward a democratic socialism."
MLK jr"
Even a great man is permitted to be wrong from time to time
Dead on my friend. Obama will, at some point, declare that he is or has converted to Islam. I suspect or fear, that it will be after he suffers a huge defeat this fall and spend the rest of his term bowing to Muslims.
Here I go changing the subject again, I really like doing that by the way.
How many here feel the change in the last few days? I think we have the socialist sob's on the run.
What do "you all", that's a southern thing, think?
It is quite simple.
Gore Lied, someone died.
Gore's rhetoric and vitriol have pushed a fragile soul over the edge. It is tragic.
The pain will be less in the short-term, but over the long-term the outcome is the same as the system we use now: complete economic disaster cannot be avoided.
Wait until tomorrow. Once today's economic numbers set in, the liberals will begin their typical schizophrenic metamorphosis to try and avoid accountability for being the disgusting criminals they are. This will conclude with feeing upon one another in the inevitable circular firing squad that is being formed with Obama being the center post (of course).
I saw that the numbers for GM are terrible, and there are some in the WH calling for lower taxes and more spending. I haven't seen much else except the market was up today.
I do find this amusing though: http://dailymail.com/blog.html
Yes, the Cato institute Fair tax, also featured on John Stossel. The VAT tax actually works here in Chile, but there is no other taxes, only the 19% VAT and Chile has a state owned copper mine that supplements.
Since the death of MLK….. Black America, under the guidance of you fascists, have done what?
Look at what redistribution and a Democrat Socialist state has accomplished for them.
Damm Jew…of all people…..one would think ramming people in ghettos and left to live a life of misery was NOT a good thing……A brown shirted Jew…who would of thunk it?…..
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