VAT- Value Added Taxes: Bigger Taxes, Bigger Government
As part of the Obama Administration's plan for "fundamental tax reform", there has been growing interest in a new value-added tax, commonly referred to as a VAT. Daniel J. Mitchell explains in a Cato Institute article that on top of this new value-added tax, “Obama is already looking at a wide range of other potential tax increases, including higher income tax rates, restrictions on itemized deductions, an energy tax, and higher payroll tax rates. Even if they all became law, the revenues would not come close to satisfying his and Congress's appetite for bigger government, particularly a government-run health-care scheme.”
A VAT “is like a national sales tax collected at each stage of the production process, rather than at the final point of sale.” True, a VAT system with its manifold layers of tax that can be saved and invested, would not inflict as much damage as our internal revenue code. However, this would only apply if a VAT system were to replace our current tax system- and “the evidence from Europe suggests it's not a good idea to add a somewhat-bad tax like the VAT on top of a really bad tax system.” By implementing the VAT system, the advanced European economies saw an increase of average tax burden from 27.7% of economic output to 39.8% of economic output.
Slapping a VAT onto the current income tax system -“a nightmarish combination of class warfare and corrupt loopholes”- will not only further aggravate the current tax situation by increasing overall tax burdens, but also increase government spending, thus giving politicians more money to spend on trivial affairs. “That's good for Washington, but bad for America!”