Thursday, January 03, 2013

What's Next?

Now that we've passed the fiscal cliff, we're about to find out that raising taxes on the rich won't really solve any of the problems. So what's next?

Here's a guess:
Value Added Tax:  Huge revenue-raiser, which is why Republicans hate it. Value added taxes are very hard to dodge, because it's largely self enforcing: if you don't pay the tax, the people you sell to have to pay it, so they tend to demand proof you've paid.  Unfortunately, as with all sales tax variants, it's hard to make the thing progressive; exempting "necessary" goods and services only gets you so far.  So it's not very popular with Democrats, either.  We may end up with a VAT, but only when we're really desperate.  
More at the link.


Anonymous said...

The other "benefit" of a VAT is that it's completely hidden from most consumers' view. What really scares Democrats is the FAIR tax-- a national RETAIL sales tax that's in plain view and REPLACES all other federal taxes. It would do wonders for the economy, of course, as well as to reducing government corruption, which is the other reason to hate it.

J. Ewing

W.B. Picklesworth said...

If we start talking seriously about the VAT, I think we'd better start talking seriously about a Constitutional Convention to overthrow this government.

W.B. Picklesworth said...
This comment has been removed by the author.
Brian said...

Washington (state) relies on retail sales tax in the absence of an income tax. It makes for unstable and unpredictable revenues. And arguably the most regressive state tax system in the country.

Bike Bubba said...

It's worth noting that if you look at history, the times of greatest opportunity for the poor and middle class were when the tax system was most regressive. It's counter-intuitive, but think about it; prior to the income tax, you got to keep what you earned, and you paid the penalty when you spent it.

Hence when we derived revenue from Constitutional sources (tariffs, excises, etc..) instead of from income taxes, the poor had the right incentives--to save and invest instead of to spend.

And Brian, if you want to see volatile tax revenue, look up the income tax. Yes, when income goes down, so does spending, but you can't exactly refuse to spend for food and such. (at least the consequences are pretty dire)

Anonymous said...

could you point to some sources on that? I am not refuting you. But, as you noted, it seems counter-intuitive and I am curious to see how that conclusion was arrived at.


Bike Bubba said...

Marvin Olasky, "the Tragedy of American Compassion." Now admittedly, there are two things going on between Olasky's history time frame and today; the progressive income tax and the welfare state. Arguably both are devastating to the poor.

Another way of describing it; with income taxes and the welfare state, attention is drawn to government as the benefactor of the poor, whereas without, attention is drawn to what really causes prosperity.

Another example of the damage of progressive taxation and welfare; ancient Rome, which was more or less emasculated as ever larger portions of people joined the Emperor's bread lines.