Regime Ponders VAT Tax

The Obama regime have put their thinking caps on and, pondering how to pay for their binge spending and payoffs for votes policies, have not ruled out a VAT tax. Any talk of spending cuts? Nope.

Value added tax can generate a lot of cash for democrats to spend because it affects everything and everybody. The government could tax seed corn, fertilizer, fuel, corn then finally corn flakes. A horde of new unionized bureaucrats would be needed to decide what to tax and how much. If the government wanted to reduce the consumption of a given item they could just raise the tax until most people couldn't afford it. Cigarettes is a perfect example. Eventually you end up with a planned economy, which is basically a Soviet style economy where the government decided what items the masses would or could purchase and at what price.

So much for taxing the rich. This tax would clobber anybody who bought anything. The progressives would probably try to pay off their victim constituency by offering pile-o-tax deductions like earned income credit. The middle class who make more than poverty level would get clobbered by much higher taxes.

But the real killer with this kind of tax is the effect on manufacturers, who would purchase raw materials with VAT added, which would increase their costs. Then the manufacturer would have his products further taxed as they are built into a final product, once again adding cost. Finally his product would be taxed as it went out the door to be sold. These tax costs might be the difference between profit or loss and reduce the competetiveness of american manufacturers compared to products built in countries that don't have a VAT tax.

In the end VAT tax will drive more manufacturers overseas where they don't have to deal with the tax. That's the ticket to keep unemployment permanently high.