The world’s greatest game of chicken.
A European-style value-added tax, or VAT, seems to be heading nowhere fast, notwithstanding Delphic pronouncements by Obama administration officials, including the President himself, which seem to keep it open as a real possibility.
The U.S. Senate voted, overwhelmingly (85-13), for a resolution offered by John McCain (R-AZ) which stated that “It is the sense of the Senate that the Value Added Tax is a massive tax increase that will cripple families on fixed income and only further push back America’s economic recovery.”
The VAT is a national sales tax imposed at various stages from production to final consumer purchase.
VAT’s next? Higher taxes on income and productivity? Or massive cuts in spending and entitlement benefits? Both? Neither? Maybe it will be a fiscal meltdown of Grecian, that is to say hellish, proportions.
The full range of responses to our crisis, with or without VAT, can be seen in recent proposals, such as those offered by Congressman Paul Ryan (R-WI), a conservative, and Steven Pearlstein, of the Washington Post.
In his “Roadmap for America’s Future,” discussed in TAS by Philip Klein and elsewhere, Ryan does not propose VAT or any other kinds of new taxes. On the contrary, he aims to balance the federal budget by 2063 and reduce Medicare’s share of the economy from a projected 14.3 percent in 2080 to 4 percent. He would use vouchers to empower individuals over Medicare bureaucracy and drive down spending.
As an orthodox and optimistic supply-sider, Ryan would simplify the tax code and replace corporate income taxes with an 8 percent business consumption tax.
As Klein notes, Ryan’s proposal is intended to change the tax code in a direction that would promote more economic growth, by creating an optional, flatter tax system with just two individual rates (10 percent and 25 percent) and without any deductions other than a tax credit for health insurance. He gets rid of double taxation on interest, capital gains, and dividends.
The Congressional Budget Office (CBO) has certified that Ryan’s plan will do what he says it will.
Steven Pearlstein, a left-of-center business columnist for the Washington Post, proposed a nine-bullet plan to address the current fiscal and entitlement crisis which featured “a new broad-based value-added tax of 6 percent, with rebates to low-income households.” He also argues for holding spending on Medicare and Medicaid to GDP growth plus 1 percentage point a year, less than the GDP plus 2.5 percent which has been the norm.
Pearlstein also wants to raise the eligibility age of Social Security and Medicare by one month for each two-month increase in the average life expectancy while reducing the cost-of-living increases for wealthy seniors and raising premiums. He would limit discretionary spending (including defense) to the rate of inflation except in wartime, natural disasters, and recessions. He wants to reduce the corporate tax rate from 35 to 25 percent, limit its applicability only to profits in the U.S. and “close enough loopholes to increase corporate tax revenues by 5 percent.”
For individual income taxes, Pearlstein proposes to increase the standard deduction and personal exemptions so that no tax is paid by a family of four with income under $50,000. Beyond that, wages, salaries and short-term capital gains taxes would be set at three rates: 17 percent for income from $50,000 to $150,000; 27 percent for income between $150,000 and $250,000; and 37 percent for income over $250,000. However, he would tax interest, dividends and long-term capital gains at 20 percent, up from the current 15 percent.
Back to the VAT, Bruce Bartlett, a former Jack Kemp staffer and supply-sider, has argued that taxes are going up and a VAT is better than, say, raising marginal income tax rates or the capital gains tax. However, he remains an outlier on the right side of the political spectrum.
Former Federal Reserve Chairman, Paul Volcker, is another. He has raised the possibility of both VAT and energy taxes as part of any solution to the nation’s fiscal imbalances.
George F. Will, conceding that a VAT would address the problem that “Americans consume too much and save too little,” nevertheless put a hex on liberal advocates of the VAT. The conservative response should be: “Taxing consumption has merits, so we will consider it-after the 16th amendment is repealed.”
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online