Bailouts for the Little Guy: New Retail Consumption Tax!

by | Sep 30, 2009 | Headline News | 4 comments

Do you LOVE America?


    For the last few years, there has been a push, mostly by libertarians, for an elimination of all federal income taxes, and replacing them with a “Fair Tax.” Neal Boortz, a talk show host out of Atlanta has been one of the lead proponents of the new tax concept. Essentially, the fair tax would be a consumption tax on goods and service. The tax would not be charged on essential items such as food or clothing, so individuals in lower and middle income groups who do not overconsume would pay very little taxes over the course of the year. The most important thing to note in the Fair Tax proposal was that it would be a substitute for federal income taxes, essentially eliminating the IRS as we know it. Here is an overview of this specific fair tax proposal and how it would have benefited Americans.

    We emphasize that fair tax would have benefited Americans. Why? Because this morning, we learn that the Obama administration is considering something very similar to the fair tax, except it would not be a fair tax, it would become a value added tax (VAT) such as the consumption taxes in Europe. Inquiring minds may be wondering what the difference is between fair tax and VAT tax. The difference, dear readers, is that the VAT tax would not replace federal income taxes, but would actually be a supplemental tax to the existing system.

    You see, we have a multi-trillion dollar health care system to pay for, and we have to continue to bailout out insolvent institutions with tax payer money. The money must come from somewhere. So, as of about right now, you can say good bye to a true fair tax, and say hello to more taxes on everything you buy (in addition to a healthcare tax, rising income taxes, property taxes and increased government fees for necessary permits and licenses).

    Learn more about how a Group Tied to Obama Urges Tax Increase  a WSJ article concerning the liberal think tank The Center for American Progress (which is anything but):

    “In all seriousness, responsible people know that additional revenue has to be part of the mix even if they believe in lower taxes in general,” the report concludes.

    The center’s president and chief executive, John Podesta, who is an Obama adviser, said the administration should consider a tax on consumption, such as a value-added tax system similar to that in use in the European Union. Mr. Podesta suggested that its impact should be limited to protect lower-income people, who otherwise might be hit particularly hard.

    “As progressives we need to debate the policy merits and likelihood of enacting a range of options — including designing a small and more progressive value-added tax, changes to the corporate tax code, and taxing upper income earners beyond reversing the Bush tax cuts,” Mr. Podesta said in a statement Tuesday.

    In all seriousness, responsible people actually don’t want to be taxed because of mistakes made by a handful of greedy bankers and politicians, and would likely prefer that the government reduce spending, rather than send it to the moon and then tell the American people they have a duty to cover the costs.

    Econophile, a contributor at who alerted us to this story in A National Sales Tax is Coming, analyzed what would be required for the government to succefully implement a VAT tax:

    My guess is that it will include non-food retail sales and they will add services (information, professional, technical and scientific, administrative and support, waste management and remediation, but excluding medical services). The services aspect is important because this will skew the tax more to corporations and upper income taxpayers. …[Obama] will structure it so that low income people will get a refund of taxes paid. The refund will be phased out as income increases.

     In 2008 retail sales (excluding food) were about $4 trillion. Services in 2007 were another $2 trillion. Let’s say they need to raise $1 trillion over the next 4 fiscal years, or $250 billion a year. That would require a 4.5% national sales tax. In Europe they call this a value added tax (VAT) and the rate in the E.U. is about 15%.

    Another brilliant idea from our elected officials and progressive think tanks. Instead of eliminating the largest, most complex and most confusing tax system on the planet and replacing it with an effective Fair Tax, we’ll be complicating matters even more with an additional tax at point of sale terminals. The Federal government is out of money and has borrowed trillions of dollars. Guess what the collateral for those loans is. Yes, that’s right…. YOU ARE. And now, it’s time for you to do your part.

    This really brings back visions of Cartman, from Southpark, saying “Screw you guys. I’m…. going home.”


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      1. Here’s a great article on the subject at the von Mises Institute.  Useful information and perspectives for the inevitable “arguing with idiots” moments in our lives.

      2. Great link Patrick. I agree with the author here, that even the fair tax is no necessarily fair… but in my opinion, still much better than the current tax system. I don’t consume very much other than foodstuffs and clothing for the kids, so fair tax would benefit me, until of course, i go and buy a car and then i’ll be bitchin’ all the way home.

        If only we were as efficient as Lichtenstein and could sell postage stamps to cover the national debt.. but, it seems, our post office is incapable of staying in the black, so that’s going to be a no-go. (I think Lichtenstein still has not taxes and makes money this way… not 100% sure, though).

        But yes, a No-tax system would certainly be ideal.

        But then, how would we fund social programs for all the dead beats? You know, those less fortunate. You, me and anyone else with a job won life’s lottery, and it is our duty to help out the ones who didn’t get a winning ticket.

      3. If those (bleap)ers in DC add a VAT to the existing tax system (as opposed to a replacement for the income tax or something), I’m going on an “omnibus boycott.”

        I will ONLY be purchasing the bare necessities of the items that are affected – clothes and gas…and maybe some more ammo, etc. (I’ll give them the benefit of the doubt and assume food will not be covered).

        Karl Denninger suggested something like this a few months ago, and didn’t really think about it then…but a VAT would push me over the edge…and I’ll try to rally as many people as possible to do the same.

        Yeah, I know – in effect I will be hurting other people…but I see no other way to teach the bozos in Washington that you can’t tax and spend your way to prosperity.

        Man, just thinking about the possibility of this pisses me off…especially when I think about all of the money that has been WASTED on bailouts and that (bleap)ing stimulus bill.

      4. How can the poor and middle class not be affected by this?  Also, giving a tax rebate on such a VAT only works if you have a job and file a tax return.  If you are unemployed or on a fixed income, you will be screwed even more than you are now.


      1. A VAT of Taxes for the Middle Class - [...] Back in September we discussed a couple of different tax systems that could be introduced to lessen the burden…

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