Brit Hume thinks a value added tax or VAT may be around the corner. He suspects the Democrats might pass a value added tax after the November elections when Congress is in a lame duck session, assuming the Democrats lose one or both houses (If the Democrats lose control of both houses, trust me, the Democrats will pass far more than just a value added tax.). Here’s Brit offering his analysis (via NewsBusters):
A VAT is kind of like a national sales tax, except it isn’t applied when a consumer purchases an item. Instead, a VAT applies to an item every time value is added as it moves up the chain of production, which means the producer, the wholesaler, and the retailer each pay the tax on the amount of the value added. Liberals all think the VAT is wonderful because they say the consumer does not see the tax. Well, that is totally false. Any time a tax is imposed on a producer or service provider, it is passed on to the consumer. It appears to be invisible, but it really isn’t.
If you’re dealing with something inexpensive like socks, the price increase that comes as a result of the VAT doesn’t have such a negative impact. If you’re dealing with much larger, more expensive items, like automobiles, the tax will significantly increase the price of the car. There simply is no way around it. Try to think about all the individual parts that are required to manufacture a car. Let’s start with the most visible parts: wheels, steel, plastics, paint, textiles, glass, gauges, pedals, and lights are only a few. There are significantly more parts that we don’t see: switches, bolts, screws, wires, chains, belts, hoses, mufflers, pipes, catalytic converters, and it goes on and on.
Here, let me make it easier. Take a good long look at this image of this car with all its parts laid out:
You see all those individual pieces and parts? There are, what, maybe a few thousand of them altogether? You might want to grab a magnifying glass to see teeny-tiny ones. Each and every one of those parts that is made in America will be hit with a value added tax at every stage of its production, which I’m guessing is at least two stages – raw materials and then manufacturer. I’m assuming large automobile companies buy directly from the manufacturer, but maybe not, in which case, there would be three layers, possibly more, of value added taxes. And the taxes on every single one of those parts will be reflected in the final price of the car. Which means you can expect to pay a lot more for a new automobile. Suddenly, used cars look a bit more attractive, huh?
In Europe the VAT takes the place of a sales tax. If a VAT is imposed here in America it will be on top of the sales tax and since sales taxes are imposed by state and local governments and they won’t let go of those revenue streams any time soon. Not only that, but since the VAT will be reflected in the retail price of the product, you’ll pay sales taxes on the value added taxes. Isn’t big government fun?
Update: Charles Krauthammer, one of the Right’s most brilliant minds, wrote his latest column on the value added tax called The VAT Cometh. He writes of the significance the VAT plays in Obama’s presidency:
Obama set out to be a consequential president, one on the order of Ronald Reagan. With the VAT, Obama’s triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan’s strategy was to starve the (governmental) beast in order to shrink it: First, cut taxes; then, ultimately, you have to reduce government spending.
Obama’s strategy is exactly the opposite: Expand the beast, and then feed it. Spend first — which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.
Krauthammer is right. That is exactly the strategy and Obama and his government-loving leftists are absolutely determined to succeed no matter what the political consequences. ObamaCare is only the beginning of what they hope to accomplish and the VAT is key to providing the revenue stream.
Cross posted at KimPriestap