VAT Chance: Why the Value Added Tax is all wrong

April 13, 2010

Everything has a price. It’s a basic economic principle that most people learn in elementary school, but it seems Barack Obama, Nancy Pelosi and Susan Davis prefer to forget and relearn. Either that or they knew all along that the numbers on the massive healthcare overhaul simply didn’t add up. There is no good answer: Either they were ignorant and somehow missed the massive “hidden” price tag (that pundits and columnists everywhere saw very clearly), or they were not upfront with the American people. Check out the video below:

Charles Krauthammer is right. Obama is not stupid. Now that America has a massive European style healthcare system it needs a massive European style tax to cover it. It appears that Obama and Pelosi’s answer will be a national sales tax or a VAT (value added tax). Last October Pelosi stated that she supported a VAT to generate more federal revenue and on April 6, Paul Volcker, Obama’s economic advisor, suggested that a VAT would be the best way to reduce the deficit.

How would a value added tax work? It would essentially do two things: first, burden the American people and second, expand our already bloated federal government. Here’s a good definition of a national sales tax: “A tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer.” That’s right. You the consumer bear the burden of a national sales tax that would simply be added on top of our already bloated and burdensome tax system. Ron Smith of the Baltimore Sun put it well:

“What’s wrong with this tax? We can begin with the fact that it is the very essence of a regressive tax in that it makes people with lesser incomes pay a far higher percentage of what they have under it than do people with higher incomes”

As a result, we will see a massive step forward in expanding the size of the government. Smith further stated,

“Also, at a time when more and more Americans are aware of and opposed to the relentless growth of government, this is the tax that beyond all others provides the fuel for government gigantism, in part because it is hidden in the price of goods. It is what has made possible the “social democracies” in Europe and the U.K.”

Perhaps Krauthammer himself said it best:

“Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT [in place], Obama’s triumph will be complete. He will have succeeded in reversing Reaganism… Obama’s strategy is… Expand the beast, and then feed it. Spend first — which then forces taxation.”

I fundamentally believe that it is wrong to burden the American people by taxing them to pay for an enormously expensive new policy that the voters never wanted in the first place. But apparently Obama, Pelosi and Susan Davis feel differently. I believe we desperately need legislators who will represent the voice of the people, pursue fiscal responsibility with vigilance, and reduce taxes and reform the tax code, not add to it. That is what I am fighting for, and I am asking you to join me, send a message, and show Davis (and gross fiscal negligence) the door.



March 26, 2010

It is a sad, bitter irony, this health care story. “We will honor the vows of our founders,” Nancy Pelosi said in her Sunday night speech that I found painful to listen to. “This is an American proposal that honors the traditions of our country.”  And yet, with one stroke of Barack Obama’s pen on Tuesday, a little bit more of the true American tradition crumbled. Apparently Pelosi believes that rejecting the will of the people and manufacturing so-called “rights” to push through a personal and special interest agenda are all part of our great American tradition. I beg to disagree. I believe in a country where the government derives its rightful powers from the people. I believe in a country that protects the rights of the people, not one that creates new rights to justify unpopular policies.

The justification for this law has nothing to do with the true American tradition. “Health care is a right, not a privilege,” Pelosi has said on numerous occasions. If so, what is to stop the likes of Obama and Pelosi from claiming any policy proposal is a new American right? The answer: absolutely nothing. Here’s a startling fact: The Constitution’s of the USSR, Peoples Republic of China and Cuba all state that health care is a human right, not a privilege. Is that really the direction we want to push our nation? Sorry, but I find it hard to see the true American tradition in that. If you’re still unconvinced of the wholly un-traditional direction this reform pushes us, see what Max Baucus, the Democratic chairman of the Senate Finance Committee had to say this week about the reform:

“This [bill] is also an income shift. It’s a shift, it’s a leveling, to help lower income, middle income Americans. Too often, too…much of late, in the last couple, three years, the mal-distribution of income in America has gone up way too much. The wealthy are getting way, way too wealthy. And the middle income class is left behind. Wages have not kept up with the increased income of the highest income Americans. This legislation will have an effect of addressing that mal-distribution of income in America.”

Income shift? mal-distribution?  leveling wealth? Socialism? Exactly. For a great article on why health care isn’t a right, check out this link.

So now what? What should we expect from this new law? A lot more than anyone bargained for, that’s what. The thing that worries me most is how Congress manufactured a bill that would look good in the short term with no good long-term plan. “The bill spends $17 billion in the first four years, while the remaining $923 billion, or 98 percent, is spent in the next six years,” says Philip Klein of the American Spectator. How do we plan to pay for this? Taxes that many economist doubt Congress will ever even get around to passing.

I am sure we have all heard the Democrats claim over and over that the reform will cut $130 billion from the budget. Yet Tobin Harshaw of The New York Times asks,

“When you borrow from yourself, have you really saved money?…About $53 billion of the net deficit reduction is from Social Security taxes…. But since those contributions raise the amount Social Security will eventually have to pay out, the Republicans convincingly argue that this is not true ‘deficit reduction’; it’s just deficit shifting.”

Doug Foster of The National Review argues that “pegging that money to deficit reduction instead of to the continued solvency of Social Security is either naive, disingenuous or both.”

I am saddened and sobered by these facts and realities. But I do not despair. If anything I am more determined to push forward and do everything I can to protect the freedoms and liberties of the people of San Diego and the people of America. We have work to do, that’s for sure, but I don’t see a need for bitterness or cynicism. Lets grit our teeth and do what needs to be done. The American people are ready for real change. A change back to the true American tradition.  Come November, lets all make that change a reality!