September 30, 2011

Just Say No To A VAT

Henry Cain is a viable candidate for President.
I like much of what this man says, but his '9-9-9" plan does not give me tingles. "No tingles?" you may very well ask. "Why so?"

The answer is simple - because it imposes a new federal tax, a national sales tax or Value Added Tax.  Cain's 9-9-9 plan would establish a 9% personal income tax, a 9% business tax and a 9% value added tax while eliminating nearly all deductions.

Allegedly everyone would pay taxes. For about 15 minutes.

Because that's how long it would be before Congress started monkeying around with the tax laws to accomodate their friends. And now with a VAT jackhammer in their tax toolkit, Congress could really nail the most productive segment of the economy in order to benefit the least productive segment, all in the name of fairness.

Europe has been playing with VAT since the 1950's. The VAT rate has only increased from one year to the next. In Spain it is 18%, in France it is now over 19%, England 20% and in Denmark, 25%!

Food for thought.

How to reduce government? Gridlock. Bind up those thieving SOBs in Congress and the WH so badly that they can't do any damage.

This is from a 2000 interview by "Uncommon Knowledge" host Peter Robinson with economist Milton Friedman.

According to Friedman, gridlock was the unintended mechanism through which the federal government finally realized some budget surpluses during the later years of the Clinton administration.
Milton Friedman: The better model is Reagan, cutting taxes. The reason you have a surplus today, in my opinion, the credit for that has to be given overwhelmingly to gridlock.

Peter Robinson: To gridlock?

Milton Friedman: If you had had a Democratic House and Senate, as well as a Democratic president, you would not have a surplus today in my opinion. They would have spent it. Similarly if you had had a Republican president as well as a Republican House and Senate, I doubt that there would have been a surplus today. Because they would either have spent it or had tax reductions.

Peter Robinson: So when President Clinton steps forward to take his bows, you don't applaud at all?

Milton Friedman: Well, I applaud. He provided gridlock.

Peter Robinson: Okay, you applaud but for a different reason than the one he supposes.

Milton Friedman: The winning thing that really contributed to our successful economy over recent years is that the government has stayed out pretty much, with the White House and the Congress and the Senate haven't done much.

Peter Robinson: In this upcoming election, you'd hope for the White House and Congress to be captured by different parties? You vote for gridlock? Or what would you tell the next president about keeping the economy growing?

Milton Friedman: First of all, I don't think the president has a great deal to do with keeping the economy going.

Peter Robinson: All right.

Milton Friedman: I think presidents have a great deal to do with keeping the economy from growing. They can follow follow-throughs which will cause contractions. But I think the economy is largely independent of the government, and what keeps it going is its own internal development.

However, you can short-circuit that internal development. If you impose very high taxes, and eliminate the incentive to innovate, to improve, to take risks, and do things, you'll kill the economy. And that's what's happened over and over again in other countries around the world.

[...] Peter Robinson: But if you cut taxes, what does that do to help the government meet its unfunded obligations.

Milton Friedman: It doesn't do a thing, but let's go back. To meet the unfunded obligations, you really need a change in Social Security. All the rest of this talking about paying down the debt as a way of solving the Social Security problem--

Peter Robinson: Is nonsense?

Milton Friedman: --is an evasion. In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with. [emph. mine ~ sig94] That's what history tells us, I think. So my view has always been: cut taxes on any occasion, for any reason, in any way, that's politically feasible. That's the only way to keep down the size of government.


Gorges Smythe said...

I've always said that Clinton was too bad for us economically simply because he didn't really do anything in that department. Gun control might be a different matter, though.

Nickie Goomba said...

Avoid the VAT at all costs. It is a socialist playground.

sig94 said...

Gorges - COngress let the Brady gun laws lapse after ten years of accomplishing absolutely nothing to combat gun violence.

And now Clinton is all hacked off about not getting enough credit fo rht eaccomplishments of his administration - like letting Osama off the hook in Somalia and jacking up the cost of dry cleaning in Washington.

sig94 said...

Nickie - and you know what libs like to do in playgrounds...

Andy said...

When it comes to taxes, I'm no fan. In fact, the only thing I detest more is death. This said, I am in favor of a VAT for a few reasons. 1. Its a tax on the criminal economy. Those buying bling and whatnot from the profits of criminal activities will have their ill-gotten boodle taxed. 2. Those here illegally and living on an under-the-table cash existence will also become subject to taxation. Perhaps greatest of all is that it would make all citizens Stakeholders in our Republic. As such, it could stir citizens to participate more fully in our political process.

Andy said...

...And demand greater accountability of our elected representatives.

They Say/We Say said...

One has to Dance with the one who brung ya. The Congress has to raise taxes, so, their friends (contributors) will get exemptions (loop holes), and obey the contract with the Fed Reserve; the more money printed-has to have a tax increase to make up the difference from the cost to the US Gov., yea-- the Fed Reserve sells the dollar to the congress for a discount-now, and a consignment on the difference. The difference is made up by the Gov. in the form of Income Tax (on top of the regular Tax, and now social security is thrown in the general fund--by the Dems), so the Congress is busy- the Fed Reserve says it will supply a collection plate called IRS, to make sure that the Politicians don't go soft and let their good supporters (voters) enjoy the use of this bogus money system with low tax rates.
What ya gonna doooooo---Elect Ron Paul--naw Kennedy tried that, we don't need any more hobo's with shiney shoes walking from the grassy knoll.

ruralcounsel said...

Gotta believe that messing with a VAT will be more third rail than messing with a progressive income tax. The income tax can be used to divide and conquer. The VAT will hit all pocketbooks alike, including the 50% who don't pay income tax.

I know it sounds like letting the camel's nose under the tent, but it widens the tax base to all those slackers and loafers, even if they aren't on a payroll. Oh won't the welfare class howl!