A VAT is coming. This prediction is wrapped in as much certainty as possible.
Not before the 2010 elections. No Democrat standing for reelection whose seat is within 20 points will utter word one about a VAT. Their situation is already too desperate to suggest increased taxes.
It’s even money whether we’ll see active congressional committee work before Mr. Obama begins his reelection campaign: look for that in theaters near you, opening on January 2, 2011.
It’s a sure bet that the VAT comes by 2014, which is one year after Obama’s second term, or during the first year of whoever his opponent is. The more likely it looks like Obama keeps his seat, the sooner we’ll have the VAT.
A VAT doesn’t add anything: it removes value. There is no way a tax levied on a product or service can directly increase the value of that product or service.
Costs Rise, Profits Fall
Those who provide services will have to charge their clients a VAT. This acts exactly as a sales tax. Contractors must either lower their rates so that their clients pay the same as they do now, or they will lose business because their clients themselves will have less money to spend.
Most people and businesses will have less money for themselves. Remember: a tax removes money.
The Stages of VAT
The VAT is applied to “each stage” in an item’s or service’s development. But the definition of a process which creates something can be lengthened arbitrarily.
For example, widgets are made by (A) buying the raw materials, and (B) assembling them.
Rapacious politicians can easily regulate this process, defining each activity to legally be three, or seven, or eighty-two steps. You don’t just “buy” raw materials, you buy material X, then you buy material Y, and so forth.
After letting your imagination play with “assembly,” you’ll see how easily lawmakers can go berserk.
Swings Both Ways
VAT will woo both Democrats and Republicans, though it is the former that will respond with ardor. A substantial proportion of Republicans will vote for a VAT; all Democrats, except those owed a favor, will say aye.
Cancer forms when ordinary cells renounce their duty and commit themselves entirely to hedonism. These turncoat cells produce nothing of value while simultaneously consuming resources.
If not treated, the cancer will convince cells in other biological bureaucracies to join them in feeding without focus. Eventually, the host organism dies.
The only way to prevent this is to poison, radiate, surgically knife out, or starve the cancer. You must not feed it!
But the VAT will provide a gusher of fiscal glucose to the political Big “C” (Congress, cancer; take your pick). After ObamaCare, the bailout, etc. are paid off, the gusher will not be capped: it will continue. Politicians will use this money to create new programs, new rules, new ways of taking control.
Our leaders — on both sides of the aisle — increasingly convince themselves they are in loco parentis. We will be told this tax is “good for us.”
“It’s a progressive tax!” will be shouted everywhere. It will be immoral to oppose the VAT. Stand by for Pelosi-esque finger points, the severity of which will be strong enough to knock Chuck Norris himself flat on his back.
Any criticism of an Obama policy is, by definition, racist — right, tea partiers? But we will hear few cries of “racist!” aimed at VAT opposition. This is because it will appear that the VAT initiative emanates from Congress, which will support it enthusiastically.
I predict you will frequently hear the following “promise”: “The VAT will not be allowed to increase beyond its initial percentage.” The caveats that allow these “promises” to be broken will be discovered, but will not be publicized beyond websites such as this.
No politician dares risking being the instigator of a tax greater than the magic number of 10%. Nine percent sounds too much like “10%”; thus, I forecast an initial quoted rate around the 7.5% mark (plus or minus 1.25 points).
I emphasize “quoted,” because it will soon become apparent that the effective rate — the velocity at which money flows out of your pocket — will be at least one full point higher that the quoted rate.
After a decade of VAT, it will level off, as it has elsewhere, to about 25%.
Americans love complexity, so our VAT will not be uniform. Look for various constituencies to win their own VAT concessions. Higher rates for retailers, lower rates for manufacturers of products aimed at “minorities” or the “disadvantaged.” Sorry Shell, et al.: assume the position!
An initial pay-down of our hideous deficit (the VAT’s major selling point).
Skilled victims groups will receive their cut. And various carrion-feeding professions, such as tax accountants and lawyers, will sing happy songs.