Posted 4/28/10 (Wed)
By Neal A. Shipman
If you have been listening closely to the political tongues wagging in Washington, D.C. recently, everybody is finally saying that it is time for something to be done to help erase the huge 11.4 trillion dollar, and ever growing, federal deficit that the United States is piling up. Frankly, it’s about time that our elected leaders in Washington, D.C. come to grips with the enormous debt that they are saddling future generations of Americans with.
So with all of the hand wringing and anguishing over the debt, is anyone in Congress or the Obama administration talking seriously about making real budget cuts? Not really. There are no proposals on the table to slash government programs or spending. In fact, just the opposite is happening as government programs and expenditures continue to grow.
Instead many members in Congress and the Obama administration are just posturing until after the November elections before they reveal their real solution to solve this financial mess. And that solution is going to come in the form of a Value Added Tax (VAT).
What is a VAT?
Quite simply, a VAT would be a new tax that would be added at each point of the process of making any item.
So in addition to the sales tax that a consumer pays when they purchase an item, every supplier of a product that ultimately becomes part of the finished product would also pay a tax to the government. In the end, no one but the government would really know how much tax was being paid or collected on a product.
While the government will use a VAT to skim off taxes (money) at each of the manufacturing steps, in the end it is important to remember that it will be the ultimate purchaser who will be footing the total tax bill as each reseller along the way will pass along its VAT costs.
And all of those new taxes are going to raise the cost of virtually every product that Americans buy. From groceries, which are now exempt from sales tax in many states, to the clothes, furniture, appliances, toys, lumber and automobiles that we buy, everything will have several layers of new taxes piled onto the purchase price under a Value Added Tax.
So in spite of his campaign promises to lower taxes to most Americans and not to raise taxes, it appears that the Obama administration is about ready to do a complete about face and hit Americans with the biggest tax increase they have ever seen.
Will a Value Added Tax fly its way through Congress and to the president’s desk for his signature? Considering that Congress enacted a sweeping change to the nation’s healthcare system over the objections of the vast majority of Americans, one wouldn’t want to bet against it.