Monday, August 20, 2018

To VAT or Not to VAT: That is the Question

With profound apologies to William Shakespeare, for high jacking perhaps one of the best known and iconic phrases of all time.

“To be, or not to be: that is the question”, the opening line is of course from “Hamlet”, and throughout the centuries this masterpiece of a drama, along with its timeless soliloquy has been studied and dissected by countless theologians and philosophers through the years. What was the profound message behind these immortal words?

Many scholars have interpreted Shakespeare’s words has a choice between ("to be") and life of silent acceptance…or ("not to be") as a primary focus of Hamlet's dilemma. However, if we take those timeless words with their profound meaning within the context of the current financial drama that is now being played out in Washington, then we'll perhaps have a better understanding of our own modern day tragedy that is now unfolding..

Former Federal Reserve chairman and Obama adviser Paul Volcker, suggested that the United States should consider imposing a "value-added tax" (VAT) similar to those charged in Europe to help get the deficit under control. The "value-added tax" is simply another slow and calculated march towards what can best be described as the “socialization of America”.

Like Shakespeare’s “Hamlet” who asked “Whether 'tis nobler in the mind to suffer the slings and arrows of outrageous fortune, or to take arms against a sea of troubles and by opposing end them”.

The dilemma for Hamlet as he confronted is own existance and his fears of the unknown, is the same paradox that we now face as a nation And if what is taking place in Washington today, were a “Shakespearean Drama”, our opening line would be “do we die a slow and silent death, and slowly sink into the abyss or do we stand up and fight against a government that has lost its principles”? That’s the dilemma that we currently face as a nation, and if anyone doubts the course that this administration is on, simply use that God given gift called “common sense”.

Within the first 14-months of this administration, the budget deficit has quadrupled, and the out of control spending of bailouts, stimulus packages, and massive government entitlements, threatens our triple A standing around the world, and brings us ever closer to the brink of bankruptcy.

We are currently 8-trillion dollars in debt, and within the next decade the CBO projects that another 12-trillion dollars will be added to the debt, add to that this massive healthcare entitlement bill, that has just been rammed through congress, with its slight-of-hand tricky (double counting of Medicare and other accounting gimmicks), and you have at a minimum, another projected 2-trillion dollar entitlement. Combine that with a growing senior population and record unemployment, and you have the perfect financial storm.

In order for this administration to sustain this massive spending and borrowing orgy, and to pay down the debt, they need to raise revenues; however Obama is a slick and wily politician and realizes that rising taxes among the middle class would outwardly break his campaign promise of not raising taxes and of course would be unpopular in the midst of a severe recession and further erode his presidency.

And while taxing the “rich” is always a good political strategy for “progressives”, it would not generate the types of massive revenues needed, and that’s where the "value-added tax" comes in, its’s a insidious form of hidden taxation, and a perfect tool for this administration to hide behind.

Volcker acknowledges, that instituting a VAT tax would be a highly unpopular move, but quickly added that such a tax is "not as toxic an idea as it has been in the past."

Of course the White House on cue, issued an immediate response to Volckers comments “"The president has passed historic tax cuts for middle-class families and continues to push for more tax cuts. The president is not proposing to cut the deficit at the expense of middle-class families."

Again, all one needs to do is look at the numbers and this adminstration’s progressive agendia to “fudamently transform America” to realize that the course this adminstration is on, is simply unstainable without massive tax increases across the board

I suspect that within the next few months this trial balloon by the White House will once again be floated out by another Obama adviser, and of course downplayed again by the White House. My sense is that they're priming the pump, and trying to gauge how severe the pushback will be.

If anything the healthcare debate has showcased Obama’s abilities to manipulate the process behind-the-scenes, without directely being envolved. It’s an excellent strategy in pushing through his radical agenda, and of course as demonstrated, he’s more then willing to sacerfice house members and colleauges within his own party to push through whatever agenda he needs to push through.

For those unfamiliar with the VAT tax, simply take a look at our Europian neighboors across the pond, and you’ll have a good idea of what’s in store for us. Unlike a sales tax, that adds a one time tax on an item sold at the end of the manufacturing cycle, the VAT tax is levied at each stage of the production cycle for whatever goods and services you purchase.

Politicians of course love this form of taxation because it gives them political cover, in that the tax is hidden within the purchase price of the goods and services sold, and of course no one is exempt. The danger with this type of insidious tax is the temptation by politicians to quietly raise rates to produce more and more revenues, as illustrated in Europe.

Countries like Denmark, Germany, Great Britain, Greece, and Italy are just a few of the countries that have raised the VAT tax, and by conservative estimates even a 1% VAT tax could raise as much as $100 billion dollars a year, in additional revenues, and a 5% VAT tax could bring in $500 billion dollars.

Of course it would be great if the VAT tax simply replaced the Income Tax. However the addition of 16,000 IRS Agents, to mandate healthcare suggests to me just the opposite is true, in that IRS will have sweeping new powers and be the enforcement arm of Obama’s healthcare bill. Incredibly, the federal government now either owns or controls over 50% of private industry and 100% of the funding for higher education.

The battle lines have been drawn, and though at times we may despair. I’m quickly reminded once again of our Founding Fathers and how they would have responded to this new “transformation of America” I suspect they would have once again been in the forefront leading the way, and perhaps remind this new “king” who currently occupies the oval office of another iconic character of William Shakespeare- King Richard III, when on the verge of his downfall, uttered these words in despair "Conscience is but a word that cowards use, Devis'd at first to keep the strong in awe".

Mr. President, we’re no longer in “awe”…and come this November, we’re taking back our country…one vote at a time!

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3 comments on To VAT or Not to VAT: That is the Question

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By Amo on April 18, 2010 at 07:20 am

Dean, as much as you would like to debunk my article, and sight differences within the numbers, the fact of the matter is that in order to pay for this unprecedented spending, borrowing, and massive entitlements…the government needs to raise massive revenues, and that’s a fact…the VAT tax will be upon us, if this administration should (God forbid), win a second term!!

However, I’m confident that after seeing how this administration governs, he’ll be run out of town…ala Jimmy Carter!

You can sight anything you want and dispute the figures, and quote different polls numbers all day…the American people (God bless them), realize that our republic is in danger of losing its values and its principles…across the board.

Aside from the economic melt-down to our country, his Middle East Policy is a joke! In fact he doesn’t have one, and his recent public humiliation of Prime Minister Netanyahu, stands in stark contrast to his measured and at times conciliatory and apologetic tone to dictators, and War Lords…its astounding!!!

I can go on, however that article Obama, the Middle East…and Israel” is currently in the editing stages…however, I’m sure you’ll have a lot to once again dispute, as only you can!!


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By Amo on April 18, 2010 at 09:59 am

Dean, just a few additional points on my article that you always seem to gloss over. While I single out the Obama Administration, I’m well aware that the financial crises we find ourselves in today began long before he came into office.

However, Obama has crystallized and made clear to the voting public the out of control and wasteful spending that seems to be epidemic within Washington. Obama has simply accelerated it, as no administration has ever done, and in so doing threatens the very foundation of our financial well being.

My second point is simply this; you have a tendency to gloss over basic themes or a premise to make a convoluted point. So I’ll once again make it to you, so that you’ll understand it…now try and follow this.

“Former Federal Reserve chairman and Obama adviser Paul Volcker suggested that the United States should consider imposing a "value-added tax" (VAT) similar to those charged in Europe to help get the deficit under control. The "value-added tax"

Dean, this is the “theme” and”basic premise” of my article…get it!

Now follow this Dean, I draw my conclusion based on what he said.

“Volcker acknowledges, that instituting a VAT tax would be a highly unpopular move, but quickly added that such a tax is "not as toxic an idea as it has been in the past."

That’s the premise of the article, now if you want to discuss whether the Obama Administration is seriously considering a VAT tax…that’s a reasonable debate.

Again Dean, I know you like to control and change the subject matter even if it’s not your own, however this is my article…stay on point!


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By Amo on April 18, 2010 at 01:19 pm

Dean my friend, stay on point, and you might like to read this…oh and by-the-way…this is my last response to you on this subject…I’m moving on!



Obama insiders buzz over possible Value-Added Tax

By Aleksandra Kulczuga - The Daily Caller | Published: 04/13/10 at 11:36 AM | Updated: 04/14/10 at 8:57 AM

The White House distanced itself from comments made last week by one of its top economic advisers in support of a new national consumption tax — yet others close to President Obama have similarly spoken in favor of a Value-Added Tax in recent months.

Paul Volcker, chairman of the President’s Economic Recovery Advisory Board said during a speech last week to the New York Historical Society that a VAT is not a bad idea for raising revenue. Volcker said it might be unpopular, but would have to be considered to cover entitlement spending.

“If at the end of the day we need to raise taxes, we should raise taxes,” he said.

“Mr. Volcker was speaking for himself and not the administration,” said Kenneth Baer, communications director at the Office of Management and Budget (OMB). “The president has not proposed this idea nor is it under consideration. The president has passed historic tax cuts for middle-class families and continues to push for more tax cuts.”

Baer said last year the VAT was politically problematic, but the Washington Post noted that the president was surrounded by VAT enthusiasts, reporting that “[OMB Director Peter] Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel.”

Ezekiel Emmanuel, currently working in the OMB, supports a health-care voucher system paid for by a VAT. His 2005 article in Washington Monthly magazine laid out his proposal — he followed up with a book in 2008:

The VAT is efficient, easy to administer, spreads the tax burden broadly and encourages savings … Polls show that many Americans are willing to accept higher taxes in exchange for guaranteed health care.

Despite the administration’s vocal denial that a VAT is under consideration, a string of reports have noted that close presidential advisers want a VAT. From the Wall Street Journal in September:

John Podesta, who is an Obama adviser, said the administration should consider a tax on consumption, such as a Value-Added Tax system similar to that in use in the European Union.

Podesta founded the liberal think-tank Center for American Progress (CAP) in 2003, and in 2008 became the head of Obama’s transition team. He went on the record on Bloomberg TV in September of last year in support of the tax:

A so-called consumption tax would “create a balance” with European and Japanese economies and “could potentially have a substantial effect on competitiveness,” said Podesta.

CAP said Podesta’s comments have been misconstrued.

“John said that it’s something that people have to look into as deficits grow, and CAP has in some of its papers … looked at the VAT as a possible option,” said Anna Soellner, vice president of communication at CAP. “But we’ve never come down and said that the VAT was the way for the administration to go forward.”

“If you look at what Bernanke said even yesterday — it’s something he’s raised, as has Doug Elmendorf. There are many people who say the VAT is one of many options to look at.”

Congressional Budget Office Director Doug Elmendorf said he was fielding many questions from members of Congress about the VAT. As far back as 2007, CAP was on the record touting the VAT:

Unless it was paired with a significant and popular national initiative, such as a revamping of our nation’s health-care system, a VAT is unlikely to be added to our nation’s tax code in the foreseeable future.

Matt Yglesias, a blogger for CAP, told The Daily Caller, “Dealing with our deficit problem is certainly going to require higher taxes. Most economists think that taxes on consumption, like a Value-Added Tax, are more economically efficient than taxes on labor or investment income.”

“In the short-run, nobody’s going to want to raise taxes until the recession is well behind us. I believe the preference in the White House (and certainly my preference) is to first look at reforming the current individual and corporate income taxes to reduce loopholes and deductions before we start thinking up a brand new tax,” Yglesias said.

House Speaker Nancy Pelosi was direct when she said last year it was “on the table,” during an October appearance on the Charlie Rose show.

“The real issue here is whether we are looking at substituting a VAT for some of the inefficient tax policies we have now, or if we are talking about adding it on top of the existing structure,” said Ted Gayer, Senior Fellow in the Economic Studies program at the Brookings Institution.

“I don’t know how [Obama will] ever square this circle of his campaign promises,” Gayer said.

“The intellectual class, the group of people that would advise him would be supportive of it, sure,” he continued. “If they’re ever going to move forward they need to strategize more than just having Volcker talk about it — they need to make sure they have buy-in from many different groups.”

The VAT requires producers of goods to pay a tax on every stage of production. Currently businesses can buy materials tax-free, and a sales tax comes only at the end of the chain. The VAT would fundamentally change the way taxes are collected in the U.S., putting the burden on businesses to collect fees incrementally.

Critics say it is a way to hide a massive sales tax from consumers and increase the size of government. Supporters say it is a fair and progressive tax on consumption that is more effective than current means of tax collection.

Almost 150 countries in the world have a VAT with rates ranging from 5 to 25 percent

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