by Smitty
I concur with Ace’s objection to the idea of a VAT:
It should go without saying that the VAT is an exceptionally bad idea, whether it’s paired with a flat tax or a fair tax or any other tax and whether it replaces the federal income tax or not. Whatever its merits, they are outweighed by its key features: the VAT obscures for the taxpayer just how much money is being sucked up by the government; it is prone to Congressional abuse; and it is, in the words of economists, “efficient.”
Yes, you can put VAT on each and every sales receipt. But unless the taxpayer keeps and diligently tallies every receipt, he will have no idea what he’s ended up handing over to Uncle Sam.
This feature of the VAT is a tax-and-spend liberal’s wet dream because it keeps the taxpayer-voter in ignorance of how much of his property the government is appropriating over time. Even under the current complicated income tax scheme, the taxpayer-voter has a pretty good idea of how much of his annual income gets sent off to Washington, D.C. And he can then make reasonable predictions and demands and votes when Congress starts fiddling with tax rates. But for the average American, if Congress were to adjust a VAT, the question “how much does this affect me or my business” becomes difficult to answer. Again, unless the taxpayer-voter has been keeping track of his consumption.
And I respect Herman Cain very much. However, if you’re conservative, you might want to ask yourself: after Cain, who does the conserving?
Cain may respect Greenspan for having been a good Federal Reserve chair, for some value of ‘good’. However, as far as I can tell, the whole concept of the Federal Reserve has gone pear-shaped. And I don’t see how the VAT avoids sitting alongside the Federal Reserve as another tool for avoiding doing the correct, conservative, reasonable, responsible thing: saying ‘NO’.
- Got a problem balancing the budget? VAT!
- Need money to fund a project to buy some votes? Jack that VAT!
- Got an economic feevuh? Call VAT man!
- VAT! What is the question?
None of this is intended as a swipe at Herman Cain, whom I’ll happily support as GOP nominee. I’m just concerned that the real problem we face is an over-powered DC, and a VAT sets a precedent that, if history means aught, will be molested horribly within my lifetime.
Unlike the Boomers, who really don’t seem to care fig #1 about any generation past themselves, I think that we have to look really long and hard. The World’s Youngest Blogger is the guy I have to answer to about how we deal with the death of Progressivism. VATs are a really smashing success in Europe, as long as you don’t care that it’s your wallet getting smashed.
What I want to hear from candidates is how they’re going to deflate the Federal over-reach bubble. A federalist approach could diminish DC and restore the power of states and the federal government to act as vertical checks, even as we restore horizontal checks of Congress on the Executive. A VAT, on its own, won’t kill the American experiment, but it could be a contributor, mixed in with all of the other legacy Progressive ideas with which we seem strangely comfortable.
Update: linked at The Lonely Conservative.
Update II: A moment of agreement with Grover Norquist:
Norquist was even less sanguine about Cain’s 9-9-9 plan. “Having three taxes, all of which can grow – it’s like having three needles in your arm taking blood out, it’s much more dangerous than having one,” Norquist explained.
As you sit at the gas pump, do you know how much of each dollar you’re spending goes to Federal, State, local, even city taxes?
Do you know exactly how much in fees, taxes, and surcharges is taken out of each dollar of your phone bill?
In the checkout line at the supermarket, do you know exactly how much of each dollar is going to pay the taxes, government department fees, highway fees attached en route to every bite of food you just bought (even the ‘untaxed’ groceries are taxed at some point in their production).
In the clothing store or appliance store, do you know exactly how much of each dollar you’re spending goes to import taxes, farm taxes, highway and other transportation taxes, customs fees, recycling fees and other charges?
In all of those cases do you know exactly how much of each dollar you spend goes to merchants’ and manufacturers FICA, worker’s comp, health plans, etc., witholdings?
Of course you don’t. No one but the most anal-retentive EVER tallies all that up.
Better by far to have to keep closer track of fewer taxes than the flash-mob pocket-picketing that constitutes modern government.
If the government announces an increase in a sales tax or VAT and the public doesn’t like it, the public can announce a new government. Right now, we’re literally stuck with a situation of “I don’t know how ya done it, but ya done it.’
If nothing else, Cain’s plan does away with that.
From Wikipedia: Maurice Lauré, Joint Director of the French Tax Authority, the Direction générale des impôts, was first to introduce VAT on April 10, 1954, although German industrialist Dr. Wilhelm von Siemens
proposed the concept in 1918. Initially directed at large businesses,
it was extended over time to include all business sectors.
France 1954: Radical Party in power.
Dr. von Siemens, German Industrialist, believer in the Bismarckian welfare state.
VAT: Another Progressive Idea
Herman Cain’s 9 business tax Is Not A VAT.
VATs require extensive documentation to track each item so it can be taxed. Cain’s tax is based off aggregate business information.
VATs are the definition of opaque. It’s darn near impossible to tell how much of an item’s cost is due to the VAT without tracing it and all its components all the way back through the supply line. Cain’s tax is a flat 9 percent; easy to calculate.
Sure, Herman Cain’s tax is sort of like a VAT, if you ignore that it doesn’t have the two main horrible features of a VAT. But that’s kind of like saying a bicycle is like a motorcycle because they both have two wheels.
Arthur Laffer, the man whose idea was behind the Reagan/Kemp/Roth tax cuts, has come out in favor of Herman Cain’s 9-9-9 plan:
http://www.humanevents.com/article.php?id=46828
So has Paul Ryan.
It doesn’t really get rid of all that. I just looked, and it doesn’t mention the federal gas tax, for instance. Actually, one regulation I could probably get behind would be to require gas stations to post their price and add on the taxes at the pump so that we’d be more aware of the tax we pay.
I think people are pretty aware of sales taxes on most things. If you’re budgeting, you pretty much have to be.
Still the simplicity of 9-9-9 is inviting, especially in that it gets rid of a lot of taxes. But I’m not sold on the effects.
Cain’s plan should be called the 27 plan.
To be fair dropping bricks on ones feet until one went into shock and lost consciousness would be more fair and rational than our current system.
Very simply, @theHermanCain:disqus ‘s 9-9-9 – or 27 – plan will place an additional tax on Americans without getting rid of any of the other forms of taxation. As far as I can see, that 27 % would soon be on top of the other taxes already in place.
Hey, Mr. Cain, I’m Taxed Enough Already! Hace we forgotten the real reason for our TeaParties? No New National Sales Tax!
No federal sales tax. No, no, no. It will morph into a VAT. The collection apparatus will grow and grow and grow, and the transaction/collection costs will balloon. It will crush small businesses and probably internet businesses in many cases, as well.
It will be one more lever to pull to achieve desired “social outcomes.” It will punish the disfavored and reward the favored.
It is everything bad about our current tax code layered on top of our current tax code. There is no way our current income tax code will be “simplified” before layering on the sales tax.
The argument that there are already a bunch of hidden, unfair taxes embedded into our consumption is not much of an argument for more of the same, frankly.
Simplify the income tax code. Quit giving the tax-y sounding but actual welfare “earned income credit” money to people. Lower the rates across the board, but spread some of tax burden across the board.
If that EVER happens (and it will not, no matter who is president), then maybe we could talk about a national sales tax.
It may be a “great idea” in some economist’s model, but we live in a real world of power- and money-hungry politicians.
One more tax for which they are unaccountable is not going to help ameliorate that problem.
Herman Cain may be a good guy, but we need to start moving back toward being a nation of laws and not of men.
OK, assuming it is not a VAT (and I don’t necessarily agree that it is not) how does @theHermanCain propose stopping future Congresses from making 9-9-9 into 15-15-15 or 33-33-33?
That’s not his job. There’s these people called voters, see…
Regardless of all the rhetorical gamesmanship here, a “National Consumption Sales Tax” is still a VAT. Just because it’s championed by a guy we like doesn’t make it any less of a bad idea. Reagan had bad ideas, too. Nobody’s perfect.
I like Herman Cain IN SPITE of this plan. As one poster above said, what’s to stop Congress from turning it into 15-15-15 or even 33-33-33? As for Cain’s 2/3 majority rule, the libs would find some way to circumvent it–in court, through procedural cheating (remember Reconciliation and Obamacare?), or through out-and-out brazen lawlessness (who cares what the law says? We have an EMERGENCY here!)
While 9-9-9 sounds catchy, backing off the National Sales tax might gain him more adherents–call it, say, 10-10…or 12-12, or something.
But where I do agree with Cain: junk the current, convoluted system, and his idea to combine income/payroll taxes into one flat rate is marvelous.
41 Republican Senators or 218 Republican House members or a Republican President should do the trick.
You haven’t read the plan, obviously. 9-9-9 gets rid of all the other taxes. RTFP already.
NO WAY should we open a new federal stream like VAT or a property tax… government can’t be trusted with any such thing, and any true fiscal conservative knows that
I applaud the man for stepping up with a plan, but there probably should never have been a federal income tax either… it was supposed to be ‘temporary’, please
Is there anything more detailed than this?
Here are the taxes it claims to end according to his web site:
* Ends all payroll taxes
* Ends the Death Tax
* Features zero tax on capital gains and repatriated profits
However, from Businessweek:
What about stuff like royalties on oil or natural gas? It’s just a thumbnail sketch, but I think throwing around stuff about it “getting rid of all the other taxes” is disingenuous.
In and of itself, I’m not claiming a 9% VAT is evil. It’s the increase over time to 19% that will choke.
I also like Ryan, but and appreciate that his centrist ideas are a place to start. Does it stop there? History argues it goes pear-shaped.
Very well said. Please comment at this caliber on every post.
I’m all for killing the current mess. I just don’t like the Gov’t turning the country into an ATM.
The back-and-forth on this plan could be an opportunity for Cain to demonstrate better listening skills than most others.
That’s why we need to keep 41 Republican Senators in the Senate that aren’t RINOs. Actually, we need that for a number of good reasons; keeping taxes from going up is just one of them.
Here’s the thing. Why does the corporate rate not allow businesses to deduct the costs of wages? This, to me, is the key to why this is, for all intents and purposes a VAT. In some ways it’s better (simpler to administer), but it’s definitely worse than simply taxing companies’ profits.
This tax will, of course, hit service industries the hardest, since more of their costs are labor. Guess which sector of our economy has been growing relative to others.
The obvious move is to give employees special shares and pay them in dividends, reverting labor back to dividends, which will be just another example of stupid unnecessary behavior dictated by the unintended consequences of another government action.
Yeah, I imagine that’s what people said when Taft proposed a 2% income tax.
Dang. Discus only lets me click the Like button once. 🙁
And how has that worked out for ya? (16th Amendment)
If we always do what we’ve always done, we’ll always get what we’ve always got.
For all the bitching that goes on in these comment threads, an awful lot of you seem wedded to the status quo. The main, original problem is the 17th Amendment, which resulted in all the money, and therefor all the power, ending up in DC. Because the state legislatures no longer send senators to DC to represent them, there are no realistic restraints on the ability of Congress to pick your pocket.
Repeal the 17th, and the 16th Amendments. Go back to the Founders’ intent that allocates most power to the States, and you will see a variety of tax plans. Then the libs can go crazy, but it will only affect their states. Sane states will offer an escape from the socialist madness, unlike now where there’s no relief, and no certainty that a good plan implemented in DC will have any permanency.
I have and it does not.
irrelevant. THE VOTERS didn’t do their job, not the ex-
president.
I think there’s a case for saying the voters didn’t do their job, but it was during the Amendment process.
And I bet you don’t trust that Laffer guy cuz he grades on the curve. Yes, history moves on, and the people living in the part of it past us are responsible for maintaining their part of it, a responsibility we have in too large part rejected. We CAN’T build permanent perfection. Club Med closed down and even Disneyland has been updated from time to time. We’ll never be able to fix government spending just once and it’s unreasonable to expect that from anyone. Shoot, the Almighty created the heavens and even THEY are gonna run down in a few billion years…
Not RTFMA, yet? *g*
No, completely relevant. There is a CENTURY of data to show that once a tax is imposed it will stay and grow. We need to shrink and eliminate taxes, not impose more of them.
It doesn’t matter who you think did or did not do the job, the FACT is that once a tax is levied, history says it will live long and prosper on our backs.
What about Taxed Enough Already do people NOT get?
So are you ready to get on board my idea of a constitutional amendment calling for a flat tax and making progressive taxes (as well as rebates, refunds, and loopholes) unconstitutional? Until that, or something very similar comes about, this issue will never go away.
Well, businesses would no longer have to pay the 15.3 percent payroll tax, so even with the 9 percent tax, they’ll still come out 6+ percent ahead.
My understanding is that under current law, the payroll taxes are business expenses for the purposes of tax. So those were already being deducted (along with the rest of the employees salaries!) under the current rates.
By eliminating salaries altogether, you’ve reduced the rate, but vastly inflated the amount on which you’re paying taxes. Businesses are no longer paying taxes on actual profits.
Unless the plan is written so poorly as to not consider this basic fact. Here’s what it says:
First, remember Cain himself claims the 999 plan is transitional on the way to the Fair Tax. It is hard to reconcile this with the wild claims of how great 999 is by itself. Why would we ever trade in such a great system?
Secondly, saying “X supports this idea” is a logical fallacy, the Argument from Authority.
Thirdly, it doesn’t add up. Every estimate of revenue I’ve seen shows 999 coming up well short of current receipts – and that means even bigger deficits, which is just not acceptable.
Lastly, any plan which relies upon the sound judgement of future Congresses and Presidents is a non-starter. History proves that neither branch gives us any reason to assume future competence, judgement, or good faith.
It’s a nice catchy sound bite, but Bachmann has a point that the devil IS in the details.
What? I demand an anti-entropy tax to fix this!
I’m far from being on board with this 9-9-9 plan, but it also presupposes extensive cuts in government spending, which is something else about it that makes it’s validity very tentative at best.
[…] from both sides. My biggest concern has been that third 9 – the national sales tax. Others feel the same way, the question being, how will they prevent future congresses and presidents from incrementally […]
One of the purposes of Herman Cain’s 999 plan is to transition away from the income tax completely, and into the Fair Tax. If the 9% sales tax is modeled after the Fair Tax, then it is not a VAT. This from fairtax.org:
The FairTax is not a value-added tax (VAT) since it is collected solely at the retail level, and no tax is imposed on intermediate sales upstream in the manufacturing or distribution process.
All of the embedded taxes that are hidden in the price of everything we buy, are stripped away.
As for the Govt’s ability to raise the percentage, while it’s not inconceivable, it would be more difficult for them to accomplish, as it would affect the entire population, regardless of income level. Whereas the tax system in it’s current form makes it much easier for pols to engage in class warfare; if the bottom 50% are suddenly required to pay taxes, they’re also going to squall at the mention of a tax hike, and that doesn’t bode well for pols who want to get re-elected.
EVEN MORE IRRELEVANT THAN THAT, STEVE! *g* If we know a phenomenon exists, and we know and can affect the mechanism that causes it, then it’s their bad if they don’t act accordingly. Build a house on the side of an live volcano, vote for a politician who wants to raise taxes, then shame on you.
If we or our descendants let it then shame on them and on us for not teaching them better.
Exactly! Starting a federal sales tax sounds like playing with matches at a gas station.
Actually, I’m more worried that the Corp tax will morph into a VAT and will be raised at every opportunity by future Congresses, but the Nat’l Sales tax has every opportunity to do that as well. This 9-9-9 thing is a bad idea all around.
I agree completely with the anti-Cain folks here. He’d try to run the US
like a “business”. Worked out great for Arnie, didn’t it?? No gov’t
experience. He’d be in over his head faster than Obama. The Alan “The
markets will somehow correct themselves” Greenspan comment was rightly
whacked by Ron Paul. His 9-9-9 plan is a cruel joke where poor people
pay 18%, WORKING people pay 27%, and rich folks like well…. Herman Cain
pay 18%. Not a chance in hell of that ever getting 1 Democratic vote in
either house. VAT’s do not work in Europe and once people know what
9-9-9 really is, they’ll drop Herm like a bad habit. A freakin’ DISASTER waiting to happen, this guy…
[…] from both sides. My biggest concern has been that third 9 – the national sales tax. Others feel the same way, the question being, how will they prevent future congresses and presidents from incrementally […]
The solution to that is radical surgery on the governments gutty works. I don’t see that desire in any of the candidates likely to get the nomination.
It “could” be. We shall see.