White House adviser Palu Volcker likes the idea of a VAT. He said, “We have to think about really revamping the tax system.” What’s to love about a VAT (value added tax) if you’re a money hungry government? Tea party folks are by-in-large not the wealthy, right? People with money (the rich) are simply disappearing from the rolls via every method possible, even renouncing US citizenship. Billions of dollars have fled the IRS permanently this way. While the US is seeking to pass legislation to rein in this activity by taxing at the time of transaction to foreign accounts, the rich are seeking ways to remove the dollar from their portfolio altogether. But, the US is poised to seek the best of the worst. According to cbsnews.com, the US needs a “money machine.”
Enter the VAT.
What better way to punish the less wealthy who seem to be making the most irritating-to-government political noise?
It will take a while to implement but it moves us one step closer to being just like our failing European neighbors across the pond. (Greece has a general 19% VAT with some service category exceptions.)
Once in place, the government can ratchet up the rate as needed. 5%, 5.25% 9.3%… whatever.
Just 18 months ago Obama promised in his campaign, that the middle class earning under $250,000 would not see one dime of tax increase. The less you make, the greater percentage of your income you have to spend on goods and services. Instead of taxing the rich, the government can lay the burden of their increased spending directly on the backs of the working class- almost invisibly. How is this done? The VAT is imposed at every transaction, from component manufacturing to assembly to wholesale to retail. You could have four or more impositions of the VAT on everything without an ounce of paperwork. America can once more say, “Give me your tired, your poor… because we will tax them!” You can even tax the undocumented (among our poorest residents) and foreign nationals while they’re here. You can tax the struggling couple fighting to save their home as they sell off their assets to make ends meet. The possibilities are endless.
I suspect the VAT would represent a tax increase for most middle and lower class Americans. Don’t you? I suspect some kind of re-structured income tax would be paraded out as making it fair for everyone, giving the government the opportunity to increase tax on rich and poor alike by combining income tax with a new VAT system as well.
Recap of the story:
Drudge reports that Reuters published this story on the so-called backdoor tax. As of this writing, it still appeared on Yahoo. I don’t know why Reuters pulled the story but the remnants are all over the web by now. Were the Tea Party protests of the summer more accurate than anyone knew? The noise is getting louder- higher taxes are hitting us all one way or another. The redistribution spread-the-wealth and spend-our-way-out ideology predetermines the results.
From the site:
Backdoor taxes to hit middle class
By Terri Cullen –MonFeb1, 4:09pmET
NEW YORK (Reuters.com) –The Obama administration’s plan to cut more than $1 trillion from the deficit over the next decade relies heavily on so-called backdoor tax increases that will result in a bigger tax bill for middle-class families. In the 2010 budget tabled byPresident Barack Obamaon Monday, the White House wants to let billions of dollars in tax breaks expire by the end of the year — effectively a tax hike by stealth. While the administration is focusing its proposal on eliminating tax breaks for individuals who earn $250,000 a year or more, middle-class families will face a slew of these backdoor increases. The targeted tax provisions were enacted under the Bush administration’sEconomic Growth and Tax Relief Reconciliation Act of 2001. Among other things, the law loweredindividual tax rates, slashed taxes oncapital gainsand dividends, and steadily scaled back the estate tax to zero in 2010. If the provisions are allowed to expire on December 31, the top-tierpersonal income tax ratewill rise to 39.6 percent from 35 percent. But lower-income families will pay more as well: the 25 percenttax bracketwill revert back to 28 percent; the 28 percent bracket will increase to 31 percent; and the 33 percent bracket will increase to 36 percent. The special 10 percent bracket is eliminated. Investors will pay more on their earnings next year as well, with the tax on dividends jumping to 39.6 percent from 15 percent and the capital-gains tax increasing to 20 percent from 15 percent.
The estate tax is eliminated this year, but it will return in 2011 — though there has been talk about reinstating thedeath taxsooner. Millions of middle-class households already may be facing higher taxes in 2010 because Congress has failed to extend tax breaks that expired on January 1, most notably a “patch” that limited the impact of the alternative minimum tax. The AMT, initially designed to prevent the very rich from avoidingincome taxes, was never indexed for inflation. Now the tax is affecting millions of middle-income households, but lawmakers have been reluctant to repeal it because it has become a key source of revenue. Without annual legislation to renew the patch this year, the AMT could affect an estimated 25 million taxpayers with incomes as low as $33,750 (or $45,000 for joint filers). Even if the patch is extended to last year’s levels, the tax will hit American families that can hardly be considered wealthy — the AMT exemption for 2009 was $46,700 for singles and $70,950 for married couples filing jointly. Middle-class families also will find fewer tax breaks available to them in 2010 if other popular tax provisions are allowed to expire. Among them: * Taxpayers who itemize will lose the option to deduct state sales-tax payments instead of state and local income taxes; * The $250 teachertax creditfor classroom supplies; * The tax deduction for up to $4,000 ofcollege tuitionand expenses; * Individuals who don’t itemize will no longer be able to increase their standard deduction by up to $1,000 forproperty taxespaid; * The first $2,400 ofunemployment benefitsare taxable, in 2009 that amount was tax-free.
Clarification: This is an added comment, not part of the original: Trickle-down-taxation
Update: Here we are nearly a year later and we see expenses rising on food, gas and most notably, healthcare. Now some states are even considering eliminating 12th grade to save money. The times, they are a changin’. This back-door tax effect appears to be in full swing.
Update and Obamacare:
Huffington Post declared the story “vastly untrue”, of course, but then what’s that truth many Americans are already experiencing right now? While a Republican surge created a temporary stay of new tax levels, the expenses of health care, in particular, continue to rise as insurers and providers ready themselves for the new requirements of Obamacare. That’s why, despite the rhetoric about violent rhetoric and the attempted Jared Loughner effect by the hard left, the business of the 2011 congress is to maintain focus on the real issue and restrict and repeal this bill known as Obamacare that gives special powers nearly 2000 times to an administrative agency.
