All right, the value-added tax, and not only the value-added tax, Volcker at the Historical Society of New York: value-added tax and we’re going to need some kind of carbon tax to get rid of these deficits, pay down the debt. It’s coming. We’re just going to have to do it. It is coming. They are going to do it. They’re not going to reduce spending, folks. This regime is not going to reduce spending. There are 130 countries that use the value-added tax. Hungary’s VAT is 20%. Last time I was in the UK it was 15% there. It’s probably gone up. Nineteen percent in Greece, and it’s really helped them, hasn’t it? All this new tax money just gets spent. It’s not going to reduce any deficit. It’s not going to go into any pool to pay down the debt. It isn’t going to happen. The reason politicians like the value-added tax is, is it’s hidden. You can’t see it. It’s a tax placed at every level of production and sales, every level, manufacturing, wholesale, retail, wherever, a little bit is added at every step of the way but you don’t really see it. You end up paying for it all when you buy the product or the service. It hasn’t helped Greece in any way, shape, manner, or form.
Now, the value-added tax is how they’re planning to pay for Obamacare, according to the Heritage Foundation’s Morning Bell. And here’s what they say. ‘The left’s solution to this problem has been simmering for some time now. Senate Budget Committee chairman Kent Conrad (D-ND) floated the idea to The Washington Post last May. Speaker Nancy Pelosi (D-CA) told Charlie Rose it was ‘on the table’ in October. And yesterday White House adviser Paul Volcker told the New York Historical Society it should be considered. The ‘it’ here is a Value Added Tax (VAT), which is a fancy way of saying national sales tax. A VAT can be (and has been) structured in many different ways. But the real world results are always the same: higher taxes, more government spending,’ ’cause they don’t use the money to pay down debt. You get ‘lower [job] growth,’ because you’re taking even more money out of the private sector, ‘fewer jobs,’ because you’re taking more money out of the private sector, and you have ‘more special interest power,’ because they all lobby for their business to be exempt from it.
Now, as the Heritage Foundation says: ‘Higher Taxes: Don’t believe for a second that a VAT will help offset other taxes. International evidence clearly shows that a VAT is likely to increase the aggregate burden of government. Europeans used to only have a slightly higher tax burden than the United States. But beginning in the late 1960s, European countries began to implement VATs. Since then, the overall tax burden in Europe has climbed rapidly. And once a VAT is in place, the evidence shows that the tax rate rises over time,’ just like every other tax rate rises. ‘Higher Government Spending: Not surprisingly, with more revenues, European governments turn around and spend much more than the United States does.’ I can’t believe that’s true even now, but we’ll go with it. ‘According to a study by the US Chamber of Commerce, government spending grew 45 percent faster in VAT nations than in non-VAT countries.
‘Slower Growth: According to the academic literature, there is a strong negative relationship between government spending and economic performance. In other words, more government spending means less economic growth and fewer jobs,’ and it only stands to reason you’re taking even more money out of the private sector, because, ‘Economic growth is driven by individuals and entrepreneurs operating in free markets, not by Washington spending and regulations.’ It would also make Washington even more powerful. ‘No VAT could ever be levied evenly on all goods and services.’ It just won’t happen. ‘Due to political considerations, a VAT in addition to current taxes would likely exempt politically sensitive items like food, clothing, health care and housing.
‘Industries would lobby heavily for exemptions from the VAT for the economic benefits described above. This would give Congress an even larger role in picking winners and losers in the marketplace. Success would depend less on ingenuity and hard work and more on the ability to gain political favor.’ So all of the work that normally would go into creating jobs or doing a job well or creating a new product, whatever, will be spent lobbying Washington for exemption from all of these stupid Draconian shackles that they’re going to be placing on everybody. That’s where the energy is gonna go, and so Washington even more will be choosing winners and losers by virtue of deciding who’s exempt and who’s not from this new tax. ‘Our nation faces a financial crisis. But low revenues are not the problem. Spending is.’ Now, here’s a down and dirty little statistic by Brian Riedl at the Heritage Foundation.
‘Real federal spending remained steady at $21,000 per household throughout the 1980s and 1990s, before President Bush hiked it to $25,000 per household. Now, President Obama has a proposed a budget that would permanently spend a staggering $32,000 per household annually — and that’s before all the Baby Boomers retire and add another $10,000 per household in Social Security, Medicare, and Medicare costs to the bottom line. So the problem is not declining revenues, but rather a spending spree unlike any in American history. If Washington insists on spending $32,000 per household, it will have to tax $32,000 per household,’ or else we’re going to run the deficit, ‘an unaffordable and unfair tax burden regardless what kind of tax collects it.’
‘Simply bringing real federal spending back to the $21,000 per household average that prevailed in the 1980s and 1990s would balance the budget by 2012 without raising a single tax on anyone. Even returning spending to the pre-recession level of 20 percent of GDP would eliminate two-thirds of the projected 2019 budget deficit without raising taxes.’ Over the course of this program, we’ve given statistics like this, at one point when the deficit was considered intolerable at $300 billion a year. Simply freezing federal spending for five years would have balanced the budget, freezing it, counting for inflation, allow federal spending to go up every year by the inflation rate, but no more than that and the Democrats just cowed, they crowed, ‘You can’t cut the budget like that!’ We’re not cutting anything; we’re just not growing it. The dirty little secret remains, and this is what Obama’s real objective is, is to totally reverse Reaganism, and if he gets this VAT, hell he’s probably already done it with health care, but the objective here is the creation of a permanent underclass and a total reversal of Reaganism, the Reagan revolution.
If you get this health care, which he’s got, if you get this value-added tax, you get the carbon tax, then the government is the central focus of everybody’s life. Everybody is going to be doing whatever they can to avoid whatever government is doing to them rather than being creative in their own self-interest. What are they so afraid of, why do they have to wipe out Reaganism? Top marginal tax rate in 1981, Reagan takes office, 70%. Total take to the Treasury then, $500 billion. Reagan leaves office in 1989. Top marginal tax rate, 28%, dropped from 70. Total take to the Treasury, almost a trillion dollars. Cutting tax rates from 70%, that was a top marginal rate at the time, down to 28% doubled revenues. We know how to increase revenue. That’s not their objective with taxation. The regime doesn’t care about raising revenue with taxation. No, no, no. It’s about growing government, creating a permanent underclass so that a majority of Americans never even have the chance to acquire wealth. A permanent underclass will forever be dependent on the regime. That is the regime’s link to eternal power.
RUSH: Here from the Fox Business Network. This afternoon Gerri Willis spoke to a Cato Institute guy, Dan Mitchell, about the value-added tax, and she said, ‘Well, look the math on the surface looks pretty simple: 1% VAT, $1 trillion in revenue. But what would a VAT in this country put on top of an income tax due to our economy and really our way of life?’
MITCHELL: Well, ‘VAT’ is just a way of spelling ‘big government’ in Europe, because that’s exactly what we’ve seen happen there. They put in the VATs, they promised to reduce or get rid of other taxes; they didn’t. The same thing would happen in America. The end result, after all these years, is they have much, much bigger governments. They didn’t reduce deficits. Deficits in places like Greece and Ireland and England are higher than what we have, and their national debts are higher than what we have. The only argument for a VAT is if you’re a big government politician and you want a brand-new tax so you have new loopholes to auction off to campaign contributors, and you have more money to spend buying votes with the tax money of the American people.
RUSH: There you have it. That’s exactly what it does. Plus it takes more money out of everybody’s pocket. It turns everybody loose — the lobbyists and so forth loose — bribing, negotiating, paying off whatever members of Congress and the Senate to exempt their companies, their industries.