An article in the Washington Post says the idea of a national U.S. sales tax is gaining a bit of traction. If you’ve ever travelled abroad, especially to Europe, you’re probably familiar with the idea of a VAT, or value-added tax.
I’ve always found the name a bit ironic. And my favorite part of the VAT has always been that I get back what I paid as soon as I hit the darn airport.
What can I say? I hate taxes of any stripe.
However, I recognize they aren’t going anywhere anytime soon. For that reason, I think the idea of a national sales tax (ONLY if it replaces the current “system”) is worth considering. In fact, I mentioned it as one possible way to simplify our tax code in a Money and Markets a while back … along with the idea of a flat tax.
The problem with a U.S. VAT is not that it’s a slightly more elegant — and simpler – way for the government to collect revenue. After all, it is much harder to avoid (no, I don’t buy the notion that wealthy people will somehow circumvent the system by bringing their Ferraris over on secret night ships out of Italy) … it rewards saving and investing … and more.
The real problem is that for people who don’t understand basic math, it will sound completely unpalatable. All the average U.S. citizen is going to hear is this: “Prices are going up for everything you buy.”
Like solar panels, you have to convince people that the upfront investment will pay big dividends down the line. Or in this case, that massive upfront price increaes for nearly every consumable will greatly level the tax playing field and provide longer term benefits for the vast majority.
In other words, if I were a betting man, I’d say there’s no way a VAT will ever get instituted in the U.S.
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{ 5 comments… read them below or add one }
A VAT type tax is coming.
it won’t replace our current system, it will add to it.
Incomes are plummeting, as our jobs & small businesses. Their former tax revenues are now being converted into entitlement sucking and underemployment.
The only way to make up for the loss, especially considering the amount of spending coming out of Washington, will be to tax at point of purchase.
First will be the energy tax, which will devastate our economy.
Then the VAT, more devastation
Then property.
We will have all the oppressive European tax structure with shoddier “benefits”.
Beware of VAT. A good idea in principle to tax spenders rather than savers, but in Britain the socialist government has turned it into a convoluted and inefficient “make work” scheme for tens of thousands of bureaucrats. No benefit to the nation, and the red tape and extra paperwork for every business is a permanent drag on performance. Resist the siren calls of politicians who just wish to make jobs for friends, supporters and those too incompetent to work in the real world.
Is it me or is there a knee-jerk reaction from many Americans as soon as the word ‘tax’ is mentioned? Let’s get back to basics, any nation needs a mechanism to fund activities that privately owned organisations cannot give. Where does that money come from? Lets use that dirty word taxation. Apparently income tax is unfair on the wealthy and VAT is unfair on the……wealthy, actually not. I believe that originally it was designed as a luxury tax whereas now it has become a general tax in governments pool of taxes that is disproportionally paid by the less wealthy.
I also have to comment on Mr Hallett’s comment on the ‘’socialist government” in Britain, the Labour government in the UK is in no-way socialist. Or is that Socialist in the sense of ‘a party that has a vague social agenda’? that is not socialist.
Nilus Mattive Reply:
October 12th, 2009 at 1:03 PM
Well, our country was created because of unfair taxation … so it has clearly been a topic arousing passionate feelings since day one here. =^)
Even if we simply accept the assumption that “any nation needs a mechanism to fund activities that privately owned organisations cannot give,” we are left with some very big questions.
How much is enough? From whom should it come? Precisely what services can’t (or shouldn’t) be provided by private organizations? And so on …
Both income tax and social security tax were installed after our government spent way more money than they should have. Sound familiar? Its naive to think that this congress wouldn’t just add the vat on top of every other unfair tax they have burdened us with without any real reform. If you trust them to do the right thing you will always be disappointed.