Best of the Week
Most Popular
1.London House Prices Bubble, Debt Slavery, Crimea 2.0 - Russia Ukraine Annexation - Nadeem_Walayat
2. Gold And Silver – 2014 Coud Be A Yawner; Be Prepared For A Surprise - Michael_Noonan
3.Sheffield, Rotherham Roma Benefits Plague, Ch5 Documentary Gypsies on Benefits & Proud - Nadeem_Walayat
4.Glaring Q.E. Failure Spotted - Money Velocity Is Falling Rapidly - Jim_Willie_CB
5.Don't Miss the Boat on Big Biotech Catalysts: Keith Markey - Keith Markey
6.Gold Prices 2014: Do What Goldman Does, Not What It Says - David Zeiler
7.Bitcoin Price Strong Appreciation to Be Followed by Declines? - Mike_McAra
8.Gold Preparing to Launch as U.S. Dollar Drops to Key Support - Jason_Hamlin
9.Doctor Doom on the Fiat Money Empire Coming Financial Crisis - Andrew_McKillop
10.The Real Purpose Of QE - It’s Not Employment - Darryl_R_Schoon
Last 72 Hrs
Gold and Silver - Counting Blessings and Tender Mercies - 20th Apr 14 - Jesse
The CIA Through The Looking-Glass - 20th Apr 14 - Stephen_Merrill
Gold And Silver - Gann, Cardinal Grand Cross, A Mousetrap, And Wrong Expectations - 20th Apr 14 - Michael Noonan
Nikkei Stock Market - Sell Japan - 20th Apr 14 - WavePatternTraders
America has Become a Police State - 19th Apr 14
Elite Herd Psychology And War By Default - 19th Apr 14
E.U. Officially Adopts the Bank Depositors Bail-In - 19th Apr 14
Goldman Sachs Is Highly Motivated To Low-Ball Gold Price - 19th Apr 14
Save MtGox - Bitcoin Important Implications of Going Down - 19th Apr 14
Stock Market SPX Topping Valuations - 19th Apr 14
Tesco Profits Panic! Back to Back £5 Off £40 Shop Voucher Promotions - 18th Apr 14
The Obama Game - Is Putin Being Lured Into a Trap? - 18th Apr 14
The Growing Threat to Capitalism - 18th Apr 14
Build Biotech Wealth on Solid Platforms - 18th Apr 14
Has Solar Power Finally Arrived? - 18th Apr 14
Bank Depositor Bail-Ins and Real Assets vs Liability-Based Assets - 18th Apr 14
10 Ways to Screw up Your Retirement - 17th Apr 14
One of Harry Dent’s Three Keys to Market Prediction is Cycles - 17th Apr 14
Obamacare Proof Stocks - 17th Apr 14
Gold, Silver And The Mining Sector: Prepare For A Severe Fall - 17th Apr 14
Hidden Australian Life Sciences Bio-tech Growth Stocks - 17th Apr 14
Disrupting Big Data Status Quo - 17th Apr 14
What the Stock Market Bears Have Been Waiting for... - 17th Apr 14
Copper Is Pathological and Suffers from SAD, but It Has Value - 17th Apr 14
Old World Order New World Order, Chaos And Change - 17th Apr 14
Even The US Government Will Abandon the U.S. Dollar - 17th Apr 14
Gold - Coming Super Bubble - 17th Apr 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

A Matter of Time for a U.S. VAT Tax

Politics / Taxes Apr 25, 2012 - 10:20 AM GMT

By: BATR

Politics

Best Financial Markets Analysis ArticleThe insatiable thrust for federal spending continues. The will to correct our fiscal black hole is absent. Even the Tea Party Republicans lack the strength of determination and votes to reverse the ship of state. No matter which party wins the next elections, the deficits facing the budget are huge. Until a total reformation of the way the central government functions, no solution is possible to balance the books. There is no way to escape this stark reality. Expect more gimmicks, additional devaluation of the currency and the inevitable imposition of new forms of taxes.


The Bear's Lair by Martin Hutchinson offers an assessment on the addition of a VAT Tax.

"The introduction of a VAT, perhaps at a low initial rate of say 5%, will solve Obama’s problems. It is likely to be unpopular, but if it is passed under a cover of bipartisanship Obama and the Democrats should avoid most of the electoral blowback. Most important, once a VAT is in place, Obama’s healthcare plan will be funded and further Obama spending schemes will be possible without inflating budget deficits. Outlays, currently 23.8% of GDP and projected (unrealistically) by the Congressional Budget Office to decline to a low of 22% of GDP by 2015 before increasing thereafter, will with a VAT be able to increase further, to perhaps 27% of GDP by the end of Obama’s second term. Revenues will trail outlays, but instead of 20% of GDP in 2015 (including repeal of the 2001/2003 tax cuts) will rise to perhaps 24% of GDP, leaving the deficit at 3% of GDP, or about $500 billion in today’s money. Of course, were a further spending-prone President elected in 2016, outlays would rise further, as entitlement spending spiraled upwards, but that problem could be solved, at least in the short term, by increasing the VAT rate towards European levels."

A simple and elegant method to steal more from the public is an attractive alternative for the corrupt political class. The political capital needed to approve a quasi-national sales tax would be ugly, but the intensity of a financial meltdown disaster would provide another excuse for extreme measures. As long as the Federal Reserve monetizes the debt by buying Treasury obligations, the purchasing value of the dollar sinks. Larger deficits could provide cover for "so called" fiscal conservatives to abandon principle and jump on the destructive revenue enhancement deception.

The Fiscal Times article, Can a VAT Tax Solve the Nation’s Fiscal Problems?, describes the way a VAT Tax works.

"While there have been no formal VAT proposals yet and it is by no means a certainty, "it is probable," says Rudolf G. Penner, a fellow and economist at the Urban Institute. "It will be fought over vigorously, but a VAT is easy. It’s an efficient tax. And it could be implemented fairly quickly."

Penner predicts that the next fiscal crisis could prompt lawmakers to adopt the VAT. "It could be a failed Treasury auction, it could be S&P and Moody’s downgrading out debt or passing some psychological barrier with the debt to GDP ratio," he says. "In many other countries you have had to have a crisis that demanded a fiscal policy response to it."

The straightforward implementation of a VAT is a prime reason why it is attractive to the central government. Abolishing the entire tax code and starting over would be a sound start, but that option is impossible within the political structure of the depraved federal system. More taxation and increased sources is the only way the political elite have to service the interest on the national debt.

At What Cost? Basic Economics of a Value Added Tax video is an overview lecture of the rudiments of adding a VAT to an already disserted economy. Yet, when did a defective tax plan ever stop Washington from enacting higher confiscation. When the big push comes to bail out the excessive spending entitlement apparatus and the printing money ATM falters, Middle America is targeted as the last resort. Never underestimate the creative legal exploitation to plunder the taxpayer.

Pushing America into the socialist slavery that is European governance is the plan. Merging the economic burden into a global debtor obligation requires improvising our own people. If the passage of a VAT Tax requires voting out of office the last stalwart of domestic independence, the financial powers will double their efforts.

VAT Tax Ends the Consumer Economy makes the case for the consequences of adopting another source of federal revenue.

"In a rush for additional revenues, the Federal Government is poised to slam another stick up the derrière of the public. Don’t be fooled with the claims that a VAT Tax will replace the oppression of the income tax. When interest rates inevitably rise because government bonds will not sell without a higher return, the cries will become deafening that only additional revenue will forestall default. The Socialism of Europe becomes complete with the integration of America into the central controlled managed economy."

Plainly, a VAT is no resolution to the deficit spending problem. All the same, the beltway culture has never been in the solution business. Thinking that a Republican victory in the 2012 election will remove the peril of a national tax is shortsighted. Politicians are spending addicts and any revenue increase that collects higher sums of money to feed the appetites of government careerists is wishful thinking.

Short of a total collapse of the world financial system, the domestic economy will continue to struggle, while losing ground in real terms. This fact cannot be said about the growth on the federal bureaucracy or unfunded programs. Because of this inevitability, new punitive and destructive taxation is in play. Balancing expenditures by growing taxes from strong economic performance is a pipedream. Budget cuts and elimination of entire programs is core to any public fiscal sanity.

Discuss or comment about this essay on the BATR Forum

http://www.batr.org

"Many seek to become a Syndicated Columnist, while the few strive to be a Vindicated Publisher"

© 2012 Copyright BATR - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014