A Hidden Tax with Obvious Consequences
Washington is racking up debt at an astounding and frightening rate. Some have proposed tax increases as a way to pay for all the irrational projects and initiatives the federal government now funds. Increasing taxes during a recession is irresponsible and dangerous for the economy. It's also extremely unpopular.
Enter the "value added tax" or VAT. Dan Mitchell, an economist at the Cato Institute, details how it works: "The VAT is a type of national sales tax, levied on the value-added at each stage of production. Consider a piece of furniture: The VAT would be imposed when the raw timber is sold, when the sawmill produces lumber, when the manufacturer builds a chair, a tax at the wholesaler level and then when a retailer sells the chair to a consumer." Most of the increased cost of production is passed onto whoever buys the chair.
What makes the VAT so attractive to Washington's big spenders is the consumer never actually sees this new tax in writing. It won't show up as a deduction from your paycheck and you won't see it at the bottom of your receipts. What you will see is an increase in the cost of virtually everything you buy.
Some proponents of the VAT say they will use the increased revenue to pay down the national debt. A much more likely story is Washington will spend whatever new money it collects while you are left footing the new, massive bill.
Washington can't tax its way out of its spending problem, and it shouldn't fool itself into thinking it can.
Sincerely,
