The horizon is not so far as we can see, but as far as we can imagine

Taxing the Poor to Bail out the Rich

Value Added Tax (VAT) version:

When House Speaker Nancy Pelosi told Charlie Rose last October that a value-added tax was “on the table” as a possible way to solve the nation’s fiscal woes, the remark didn’t generate much interest. But as recent budget figures have put the depth of America’s problem into black and white, and with former Federal Reserve Chairman and White House adviser Paul Volcker nearly seconding Pelosi’s view recently, the idea of a VAT — already in use in nearly 160 countries — is gaining traction.

Trillions were spent bailout bankers, and every dollar spent fixing the mess since then is also effectively caused by the failure’s of the rich.

A VAT isn’t necessarily evil, but until progressive taxation is restored, capital gains are taxed at the same level as ordinary income, corporations are forced to pay taxes on their actual profits (rather than making billions and paying no taxes) and a financial transactions tax is implemented, why is another regressive tax (one that hits the poor instead of the rich) even being considered?

Oh, yeah, because this government exists to do unpopular things Republicans want to do while allowing Republicans to vote against them, as with HCR, essentially a 1994 Republican plan.

With Democrats like these, who needs Republicans?


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  1. pcurve

    I consider myself a pretty left leaning democrat who still advocates single payer system, but I think we should eliminate all forms of tax deductions and credits. No deductions should be allowed for mortgage interests, employer paid health insurance, charitable donations, 401k (and tax Roth IRA) or even property tax. Just end the madness and stupidity! For some reason, people love tax deductions, and all for the wrong reasons. Most of them don’t realize how it’s ultimately hurting them. Keep things simple god dammit. I get disgusted every time I hear politicians propose tax credit/deductions for this or that.

  2. beowulf

    Its easier to dam a river at its headwaters than at its delta. Tax money as it passes through the Federal Reserve.

    According to Professor Edgar Feige’s presentation to Bush’s Tax Reform Panel 5 years ago, deducting one half of one what of every transaction that passes through the Federal Reserve System would raise (in 2002 dollars), $1.8 trillion a year, more than is collected by the income tax.

  3. beowulf

    Obviously that should be “one half of one percent of every transaction”. Though depending on how much transaction volume is reduced by this new levy, the actual tax rate would be between .03% and .06%.

  4. BDBlue

    Do you mean Medicare? Or Obamacare?

  5. Ian Welsh

    BDBlue. Obamacare. Fixed, thanks.

  6. VAT is a hidden tax, and that’s why I don’t like it.

    When I pay my property tax, or a sales tax, or my federal and state income taxes, I see how much I’m paying. What politicians like about VAT is that it’s built into the prices we pay for goods (with, presumably, sales tax on top of THAT).

    When they don’t have the courage to show us exactly what we’re paying in taxes, you know they’re weaseling again.

    Carolyn Kay

  7. masslib

    Exactly right, I would also add that we could have a small asset tax as Robert Reich has suggested, .5% on assets of 5 mill or more. Come on, who are the Democrats anyway? They make Nixon look like a flipping liberal. But how dare them suggest a VAT when they couldn’t even establish universal Medicare. Who are they fooling? Yes, VATs abound in Europe but we don’t have their social programs.

  8. Formerly T-Bear

    @ Carolyn Kay

    Vat is not any different than sales tax, not hidden, not surreptitious or insidious unless the customs of the country allow, e.g. Ireland the vat is part of the price and is not broken out on payment; in Spain each category of vat is summed on the receipt, the marked item price inclusive of vat. Other countries have other methods of receipting, whether it is cost plus or cost inclusive, the cost inclusive many times is the less transparent when not broken into component parts relying on public ability to factor the cost and tax. There those who are innumerate are at a disadvantage.

    Are you confusing a proposed national sales tax (labeled “vat”) applied in addition to local or state sales tax? As long as the final tax is the sum of all local, state, and national tax, there is no problem presented.

    The real economic problem with sales/vat taxes is they are regressive and fall most heavily upon the least able to pay. This can be totally avoided by exempting those categories of goods and services that are basic and required for economic needs (e.g. food, medicine, etc.) and limiting their application to items that satisfy excessive (to needs) wants and desires (at which excise taxes are presumably also directed). A working political system provides the most efficient forum for determining which categories or quantities qualify for exemption or rates of taxation imposed. A working political system requires an educated, involved population, public ignorance on public matters is anathema, reflected in your closing statement. Such ignorance allowed the Reagan tax revision scheme to become the law of the land, displacing a finely crafted and balanced tax system, developed over decades. That will not end well.

  9. So, Formerly T Bear,

    When you pay $5 for an item under the VAT system, you may know that a certain percentage of it is tax, but it’s not split out. When you pay a sales tax, you see the amount of the purchase, the amount of the tax, and the total. Trust me, VAT is a way to mask the tax. They think we’ll forget about it, and a lot of people probably will.

    If they really want a tax on consumption, why not just have a federal sales tax? The software and collection mechanisms are already in place for that.

    Carolyn Kay

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