Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

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.


© 2005-2018 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

6 Critical Money Making Rules