However in order for this to work current benefits expenses will have to be deductible from a company’s portion of the VAT while at the same time reducing the income and Social Security taxes so that the the net result is revenue neutral. This way companies can continue to offer their current benefits such as health insurance tailored to their unique conditions while becoming more competitive. In fact they could even improve their benefits which is an advantage to all of us. Since imported goods would have to pay the full VAT, the VAT, in effect, becomes a modest tariff. This is one competitive advantage the EEC has. By offloading the social costs to a consumer tax both large and small companies can compete with imports. The social costs can be implemented via a combination of private and public means as history has shown that purely public means is prone to inefficiency and corruption.

Note that the proposal, modest though it may be, is not strictly revenue neutral because now the money that is currently flowing into the coffers of foreign manufacturers will now flow into supporting not just social programs such as health and retirement benefits but also for research and development and other long term necessary economic projects (such as infrastructure and rebuilding our core industries).

Surely we can take some baby steps such as these to correct the imbalance and reduce (or at least stabilize) our national debt but it will be difficult. Many powerful forces with lots of money (both foreign and domestic) have a vested interest in preserving the status quo. Probably the best chance of successfully fixing the economy is to “THROW THE RASCALS OUT“!

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Tags: Economics, free trade, politics

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