Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14
Bullish Silver Stealth Buying - 24th Oct 14
Blood in the Streets to Create the Gold Stocks Investor Opportunity of the Decade - 24th Oct 14
Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern - 24th Oct 14
War And The Law Of Unintended Consequences - 24th Oct 14
Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - 24th Oct 14
Saudi Move to Cut Oil Prices Is Now Russia's Biggest Economic Threat - 24th Oct 14
US Stock Market Top Is Now In Sight - 24th Oct 14
New Profit Points in the Shifting Balance of Power, Welcome to Saudi America - 24th Oct 14
QE Failure & Folly Of Paper Mache, Treasury Bond Integrated Lifeline Patches - 24th Oct 14
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

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