Will They Take 'No' As Answer To VAT?

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Taxation: Ask almost anyone — economists, politicians, entrepreneurs, average Americans — and they'll tell you a value-added tax is a bad idea. So why does the White House continue to consider it?

After hearing VAT opponents smeared as anti-government radicals and worse, we decided to poll Americans on the issue. What our IBD/TIPP poll found was surprising: Not only is the VAT unpopular, but it's unpopular across the board, regardless of political affiliation.

Overall, Americans oppose a VAT by 73% to 22%. Republicans, as might be expected, feel the strongest: 83% against, 14% for. But even Democrats oppose it 65% to 27%. Independents stand somewhere in between (see chart).

We're not surprised. A VAT would be a huge new tax on all levels of income, including the poor and the middle class. That, even as Americans have made it clear in poll after poll that they feel overtaxed — and that government spending is the problem.

And they're right. To eliminate expected deficits of $12 trillion over the next 10 years, the VAT would have to be enormous.

It's been estimated that a 5% VAT would generate $250 billion in annual revenues. So to get rid of the $1 trillion annual deficits expected through 2020 would require a value-added tax of 20%. And that's in addition to all the taxes we already pay at every level of government. Such a tax burden would kill innovation, jobs and economic growth. Our economy would be more like those of the stagnant, debt-ridden European Union, where the VAT averages close to 20%.

A Chamber of Commerce study suggests that spending in countries with a VAT grows 45% faster than in non-VAT countries. A VAT, it seems, emboldens money-drunk politicians to spend even more on expanding the welfare state.

That's why, as unpopular as it is, Democratic politicians in the White House and Congress can't quite let go of the idea. White House spokesmen have insisted no VAT is in the cards, but President Obama on Wednesday left the door open, saying, "I want to get a better picture of what our options are."

It's not hard to figure out why. According to the American Institute for Economic Research, federal tax revenues in 2009 shriveled by $400 billion from the year before to the lowest level of taxes as a share of GDP — 15% — since 1950.

That's a huge revenue hole, and it comes at a time when total federal spending through 2020 is expected to surge nearly 70% to $45 trillion. To fill the hole, Washington wants more of your money.

That's why it's important that Americans say no to the VAT and other tax increases now. Unless we insist on smaller government and reductions in spending, we'll soon find that we work for Big Government — and not for ourselves.

Taxation: Ask almost anyone — economists, politicians, entrepreneurs, average Americans — and they'll tell you a value-added tax is a bad idea. So why does the White House continue to consider it?

poll2010Apr21After hearing VAT opponents smeared as anti-government radicals and worse, we decided to poll Americans on the issue. What our IBD/TIPP poll found was surprising: Not only is the VAT unpopular, but it's unpopular across the board, regardless of political affiliation.

Overall, Americans oppose a VAT by 73% to 22%. Republicans, as might be expected, feel the strongest: 83% against, 14% for. But even Democrats oppose it 65% to 27%. Independents stand somewhere in between (see chart).

We're not surprised. A VAT would be a huge new tax on all levels of income, including the poor and the middle class. That, even as Americans have made it clear in poll after poll that they feel overtaxed — and that government spending is the problem.

And they're right. To eliminate expected deficits of $12 trillion over the next 10 years, the VAT would have to be enormous.

It's been estimated that a 5% VAT would generate $250 billion in annual revenues. So to get rid of the $1 trillion annual deficits expected through 2020 would require a value-added tax of 20%. And that's in addition to all the taxes we already pay at every level of government. Such a tax burden would kill innovation, jobs and economic growth. Our economy would be more like those of the stagnant, debt-ridden European Union, where the VAT averages close to 20%.

A Chamber of Commerce study suggests that spending in countries with a VAT grows 45% faster than in non-VAT countries. A VAT, it seems, emboldens money-drunk politicians to spend even more on expanding the welfare state.

That's why, as unpopular as it is, Democratic politicians in the White House and Congress can't quite let go of the idea. White House spokesmen have insisted no VAT is in the cards, but President Obama on Wednesday left the door open, saying, "I want to get a better picture of what our options are."

It's not hard to figure out why. According to the American Institute for Economic Research, federal tax revenues in 2009 shriveled by $400 billion from the year before to the lowest level of taxes as a share of GDP — 15% — since 1950.

That's a huge revenue hole, and it comes at a time when total federal spending through 2020 is expected to surge nearly 70% to $45 trillion. To fill the hole, Washington wants more of your money.

That's why it's important that Americans say no to the VAT and other tax increases now. Unless we insist on smaller government and reductions in spending, we'll soon find that we work for Big Government — and not for ourselves.

 

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