Consumption, VAT’s dat?
December 9th, 2009 by Grandpa OddballCopyright © GetOddNews and Grandpa Oddball December 9, 2009. All rights reserved.
Okay, so benefit controls probably won’t work. What then will work? A full answer is beyond the scope of this little post but one thing that will help is a restructuring of our tax laws to address the imbalance created by our foolish tariff and free trade laws and policies
For example, in my home state of Washington the politicians have decided they needed to change the sales tax as it relates to Internet sales. It used to be that the sales tax (for goods shipped within the state) was determined by the shipping origin. This was a fairly simple calculation but then the politicians got greedy. They decided that the tax had to be determined by the shipping destination. This wouldn’t have been so bad had they chosen some reasonable method such as zip codes to determine the tax tables but no; the various tax districts overlap creating a bookkeeping nightmare that not only forms a huge barrier to startup businesses but the added overhead costs have driven more than one businesses from the state. Pleas of mercy and reason fall on deaf ears as the politicians fail to realize or accept the consequences of their actions. So ingrained is the need for more revenue especially in tough economic times that in their arrogance they fail to see that they are sacrificing the golden goose!
Unfortunately it’s a hard fact of life that something has to be done to improve the economy while preserving our benefits and social programs or we’ll eventually lose everything. I’ve addressed elsewhere what basic changes I think need to be done but it’s doubtful any of those will happen until it is too late to do much good. A restructured tax system will help but not by itself. Still it would be a good start provided that it could somehow cope with political greed and ignorance as explained above. In short we should modify the tax system to make imported goods pay for their fair share of our social programs and level the benefits costs inherent in the price of goods but one cannot modify or change the tax laws unless two important conditions are met. These are:
- Any changes to the tax laws must be revenue neutral! Any other way of adding additional taxes would be detrimental not helpful to the economy. The problem of course is keeping things neutral for as we have seen once politicians stick their fingers in the pie it can spoil rapidly.
- Any changes to the tax laws need to address the benefits costs imposed on American industry.
There have been several proposals which address various parts of the situation. None of them, in my opinion, are actually sufficient to to be fully effective and all seem to ignore the revenue neutral constraint that I’d like to see imposed. Generally these proposals are variations of a consumer or consumption tax or a tariff. Examples of such tax proposals are a sales tax or a Value Added tax (VAT). All such proposals suffer from the twin defects of not being revenue neutral and are subject to political abuse. However I think that a modified VAT is worth pursuing because it has a number of advantages that make domestic industries more competitive. Currently a number of countries and coalitions such as the European Economic Community (EEC) use a VAT tax which gives them a distinct competitive advantage on the world markets.
What advantages does a modified VAT have to offer? If a revenue neutral VAT is instituted by simultaneously reducing the income and social security taxes then the playing field with respect to imported goods would be somewhat leveled. Currently domestic industries along with the income tax and Social Security tax pay for all the social costs in this country. Imported goods are given a free ride since our disastrous free trade policies
Pages:
«« previous page 1 2 3 next page »»
Tags: Economics, free trade, politics
this article with others.
