Thursday, August 18, 2011

US VAT = Broad Prosperity

Senator Fritz Hollings, in the Huffington Post, offers a coherent, convincing argument in favor of a Value Added Tax (VAT):

Inconsequential Washington, August 16, 2011
Globalization is nothing more than a war for the economy, with production looking for a country cheaper to produce. Each country competes vigorously in this war for innovation, research, technology, development, production and jobs, each building its economy -- except the United States. President Obama stays bogged down in the hot wars, totally ignoring the cold or economy war. The president could easily recover by transferring the subsidy the U. S. gives to off-shore jobs and giving it to on-shore jobs: cancel the corporate income tax and replace it with a 6% value added tax. The VAT is easily implemented and administered with computers. 140 countries compete in globalization with a VAT and don't find it regressive or "a money machine." The VAT is rebated on exports, but the income tax is not rebated. With a VAT, the more you consume, the more you pay; the less you consume, the less you pay. The poor that must consume for food, health and housing, are given exemptions from the VAT. Last year, the corporate tax produced $194.1 billion in revenues. A 2010 VAT would have produced $700 billion. $70 billion exemptions for the poor, still leaves $630 billion to pay down the debt. Spending cuts can produce more to pay down the debt. The VAT promotes exports, creating jobs. With the corporate tax cancelled, Corporate America can invest its $1.2 trillion in off-shore profits to create millions of jobs in the United States. Since there are no loopholes in a VAT, we have instant tax reform. Since the VAT is self-enforcing, we can eliminate much of the Internal Revenue Service or cut the size of government. Since the average corporate tax is 23%, replacing it with a 6% VAT cuts taxes. So this tax cut stops the hemorrhaging of our economy off-shore, provides billions to pay down the debt, creates millions of jobs, and cuts the size of government.

But the president ignores the off-shoring of our economy. He campaigns around the country calling for stimulation and government "make-work," proving himself inconsequential on jobs.
 A VAT would encourage fair trade, domestic manufacturing, domestic savings, and wage growth -- all of which would lead to broad economic prosperity. We had such prosperity in the past, we could have it again if we take back what the bankers and corporate bag men stole. Besides, the corporate apologist Heritage Foundation is opposed to it (Value-Added Tax: No Easy Fix for the Deficit), so it must be good for the country. (Mr. Dubay's arguments are typical conservative misdirection: they focus on well-known faults that have negligible impact on the overall effectiveness of the VAT, which is why smart societies governed for the benefit of the majority continue to use it. The effect of the faults can be minimized and mitigated. And Senator Hollings suggests the VAT replace the current 35% corporate tax rate, not as an addition to it. And of that 35%, most corporations pay only 3% -- rampant fraud? And few are suggesting a 20% VAT as Mr. Dubay asserts. Mr. Hollings suggests a 5 or 6% VAT. Mr. Dubay is blowing smoke in our eyes, like nutty conservative think tanks always do.)

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