Romney, RNC endorse European-style VAT tax
We thought it was only the Obama admin that wants European-style socialism, but now the Romney-led RNC is mulling the benefits of a European-style, multi-layerd national sales tax known as a VAT tax.
Barrons.com reports,
The 2012 Republican Platform calls for a complete overhaul of the federal tax system. No surprise there. But then it endorses a value-added tax or national sales tax as one possible solution to the nation’s budget problems. This is shocking. . . .
WHAT IS A VAT? It’s a sales tax, used mainly by the Europeans, that layers taxes on a product at each stage of manufacture and distribution, from raw materialto final sale. The nonpartisan Tax Foundation offers this example: “Take a wooden table sold at retail and a 10% VAT rate. The lumber company sells the wood to the furniture maker for $50, paying $5 (10% of $50) to the government. The furniture maker sells the table to the retailer for $120, sending $7 ($120 – $50 = $70 X 10% = $7) to the government. The retailer sells the finished table to a customer for $150, sending $3 to the government ($150 – $120 = $30 X 10% = $3). The total tax paid is $15, or 10% of the final retail price.” . . .
“Advocates say a VAT reduces evasion because it’s harder for three entities to avoid paying a $15 tax than it is for one,” says the Tax Foundation. According to data released by the IRS in January, based on 2006 data, the estimated gap between taxes actually owed and those paid is $385 billion. That’s more than a third of the current $1.1 trillion budget deficit. But a VAT would have to be set so high — 30% at the federal level, with state sales taxes then added on — that Mitt Romney economic advisor R. Glenn Hubbard has termed it a “political nonstarter.”
But Romney himself considers the idea viable. The blog International Liberty reports,
In an interview with the Wall Street Journal, he basically said he is willing to consider a value-added tax for the United States. Here’s the relevant passage.
He says he doesn’t “like the idea” of layering a VAT onto the current income tax system. But he adds that, philosophically speaking, a VAT might work as a replacement for some part of the tax code, “particularly at the corporate level,” as Paul Ryan proposed several years ago. What he doesn’t do is rule a VAT out.
For those who are not familiar with a VAT, it is a version of a national sales tax, but imposed at every stage in the production process and embedded in the price of goods and services. Perhaps more important, it is despised by everyone who wants to limit the size of government. This video explains how it works and why it is a money machine for big government.
Simply stated, this is an awful tax. If it ever gets implemented in the United States, the battle will be over. America will descend to European-style stagnation, eventually leading to fiscal crisis.
Any politician that supports a VAT (or even hints at supporting a VAT) should not be allowed anywhere near the White House. That applies to Mitt Romney. And it should be the rule for Paul Ryan as well.
But what about Barack Obama, you may be asking. Hasn’t he said nice things about a VAT?
Not surprisingly, he has been sympathetic, appointing VAT sympathizers to high office and remarking that a VAT is “something that has worked for other countries.”
But there’s no way a VAT will happen if Obama gets reelected. Republicans will be overwhelmingly opposed, even if only for shallow reasons of partisanship.
But if Romney wins and decides to push a VAT, many Republicans will say yes because of loyalty (much as many GOPers went along with Bush’s statist agenda) and many Democrats will say yes in order to get a new source of revenue to expand government.
One more way in which Romney is little different than Obama,and yet because of alleged conservative sympathies, he may be more dangerous to America than Obama.