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A VAT of Taxes for the Middle Class

Mac Slavo
March 30th, 2010
Comments (12)

Back in September we discussed a couple of different tax systems that could be introduced to lessen the burden on Americans and make our tax code a bit more simple. As if the 45,000 or so pages of existing tax code aren’t enough, politicians will be considering new ways to rob hard working people of their already depleted incomes.

With the costs of government rising, especially considering the new health care legislation, we are going to need much more revenue to offset spending in order to prevent a debt crisis, which by the way, is probably unavoidable at this point. The solution that the President and Congress will be looking at is a Value Added Tax, or VAT. It was implemented in European countries over the last decade with citizens forced to pay upwards of 19% on most goods sold. If you’ve ever been to Europe and wondered why everything costs so much, the VAT is a major part of the problem.

But how realistic is it for the VAT to be passed in the USA and when will we learn more? Charles Krauthammer explains in The Vat Cometh:

Obamacare was sold on the premise that, as Nancy Pelosi put it, “health care reform is entitlement reform. Our budget cannot take this upward spiral of cost.” But the bill enacted on Tuesday accelerates the spiral: It radically expands Medicaid (adding 15 million new recipients/dependents) and shamelessly raids Medicare by spending on a new entitlement the $500 billion in cuts and the yield from the Medicare tax hikes.

Obama knows that the debt bomb is looming, that Moody’s is warning that the Treasury’s AAA rating is in jeopardy, that we are headed for a run on the dollar and/or hyperinflation if nothing is done.

Hence his deficit reduction commission. It will report (surprise!) after the November elections.

What will it recommend? What can it recommend? Sure, Social Security can be trimmed by raising the retirement age, introducing means testing and changing the indexing formula from wage growth to price inflation.

But this won’t be nearly enough. As Obama has repeatedly insisted, the real money is in health care costs — which are now locked in place by the new Obamacare mandates.

That’s where the value-added tax comes in. For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude — if you exempt food, for example, the yield would be more like $900 billion).

It’s the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent.

American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.

It’s important to remember that the VAT is not a replacement for the taxes you pay currently from your income to support such things as social security, medicare, medicaid and wasteful government spending. Nor will it be a replacement for the additional funds you’ll be stripped of when you start paying universal health care taxes. No, the VAT is a supplemental, additional tax on your already heavy tax burden.

More than likely, to save some political points, Congress will not put a VAT on essential grocery foods, but you can bet that it is going to raise prices on everything else from restaurant dining and hotel rooms, to cars and clothing.

Of course, you’d think an easy solution to not having to pay the VAT tax would be to consume less and save and invest the rest. This would keep you from having to cough up another 20% to the government, right?

Wrong. Capital gains, which are basically investment gains, are also slated to rise and will effectively be taxed at your income rate, so you can expect to pay anywhere from 20% to 35% on any investment money you make in stocks, bonds, gold or even the sale of your house. Ouch.

So much for not raising taxes on those earning under $250,000.

One important consideration that may have serious implications for our economy as a whole, in addition to stripping the private sector through taxation, is that as governments raise tax rates to obscene levels, the smart money starts to flee. It used to be that investment dollars from around the world would flow to the USA because of our property rights guidelines, manageable debt and somewhat decent tax system (as compared to Europe). No more. Money will now start flowing out of the USA to “safer” countries. Where those countries are is yet to be determined, as we will likely see a global economic fallout before any serious capital movement trends are identified – but Asia and parts of South America seem to be on the radar.

Hat tip to SHTF Plan reader Patrick for the article link

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Author: Mac Slavo
Date: March 30th, 2010
Website: www.SHTFplan.com

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  1. Rick Blaine says:

    Bring it.

    I will hunker down beyond all belief.

    …except for my SHTF supplies.

  2. Paul Revere says:

    VAT will encourage bartering, black markets, and outright theft.   Washington D.C. is doomed to bankruptcy no matter what tricks they employ to screw the citizens.   The sooner D.C. falls the better so the whole country (and the rest of the globe) can celebrate it’s demise.       

  3. personofnocolor says:

    I’m with you, Mr. Revere. The demise of the out-of-control federal gubmint would indeed be something to celebrate, but the problem is they won’t go quietly. In a meltdown situation, I’m far more worried about martial law and big sis’ fema federales than roving gangs of looters.

  4. Cynical Optimist says:

    “I’m far more worried about martial law and big sis’ fema federales than roving gangs of looters.”

    Don’t worry… there won’t be FEMA federales… it will be hired mercenaries from private security firms such as Blackwater… or whatever they’ve changed their name to now.  Just like they did after Katrina hit.  There won’t be enough national guard troops to contain or deal with the uprising… so they’ll do like they’ve done with the war on terror and supplement with mercenaries.

    You’d think that BHO would have his head surgically removed from his A$$ and stop to think about the future his daughters are going to have to deal with because of  his and the rest of the Obamanation crews greed and socialist agenda.  Thank god I don’t have kids… I don’t want kids because I wouldn’t want them to have to deal with what’s about to happen in the not so distant future.

    Remember childrens… we all owe God a death… so fight and die for something that you believe in.

  5. Airborne71 says:

    Hell I owed  over $1,000 this year in federal taxes over and above what I had already had deducted from my pay . What am I going to have to pay this comming year ?  I am now forced to set aside some money each payday to get ready for next years taxes !! I have it figured out to about $200. a month !  And to the state I paid over $400. in additional taxes .  It just gets worse and worse with no end in sight .

  6. zukadu says:

    AB71:   Send them an IOU, a copy of your DD 214, tell them you’re a “sovereign citizen”, and to get their chump change from Nicolas Cage.

    You’re too short man. They have bigger fish to fry!   🙂

  7. Trend says:

    Comments…..Someone please explain this. Turn on the TV and they are saying the economy is getting better. Consumers are spending. Now when I go into Wally Mart, the shelves are empty, when I went to Best Buy for a keyboard there were a handful of overpriced keyboards and the store looked like it was going out of business with empty shelves and few shoppers. The local mall looks like a ghost mall with half the stores gone and the remaining stores with empty shelves. Driving around town most of the strip malls are empty, lots of homes for sale, lots of office space for rent. Open the newspaper and see two columns of job ads where once there were pages and pages of job ads. Prices for just about everything keep going up but the talk is there is no inflation. Can someone explain this?

  8. change for worst says:

    The Vat tax would attack the Precious Metal market ,with up to a 19% charge,An ounce of silver at market price of say 20 bucks would then be 23.8 Dollars  . Effectively killing the smaller investor and keeping them out of the market and also keeping them in this Bullcrap Fiat dollr based in nothing.

  9. kenny zlager says:

    hey, just think > with a VAT washington can have wars in 4 countries rather than only 2.

    and troops stationed in 50 more countries.

    damn, how exciting…

  10. william martin says:

    “…..after the november elections”

    wonderful initial platform idea for a truly independent third party = no  vat.

  11. JBOY says:

    OK, I get it.  They tax us with a VAT, we buy less of everything and people selling things go out of business.  This will do- in the retailers very quickly.  Brilliant!  Kill-off business.  I like it.  Of course Congress and government purchases will be excluded from the VAT- right?  Plus, wasn’t there something recently about a tax on money leaving the country, so if people try and move it, they’ll still get taxed.

    I certainly hope the American populace making under $250,000 a year revolts against this along with the rest of us.

  12. grannyb says:

    Trend – best advice? Don’t turn on TV. There isn’t ANYTHING improving about our economy – and more and more people know it, and recognize that all the crap in the MSM is just that, crap. Hope more people have the chance to wake up before TSHTF.  And don’t stop preparing.