“No Man’s life liberty or property is safe while the legislature is in session”.

- attributed to NY State Judge Gideon Tucker

Friday, September 17, 2010

A Thought About VATs vs. Income Taxes

Generally speaking, I don't like the notion of a value-added tax in the US. It's too opaque and hidden.

But there are two good things about it, compared to our existing income tax.

One is that a VAT focuses on spending, not savings. Therefore, if it were our government's major revenue-raising tax, it would resolve the current folly of doubly-taxing dividends and taxing savings at all.

The second reason that a VAT could be preferable, if set at a proper, effective rate, is that it would allow for a dramatic shrinking, if not elimination, of the IRS.

It's unlikely that our Founding Fathers ever imagined, nor would have allowed, the existence of a governmental agency with the powers and scope of the IRS. The degree to which it allows government to intrude into our lives and gather information about us is simply unparalleled.

Under a VAT, it's possible to make tax collections much more perfunctory and less a matter of annual filings. Like a sales tax because, in effect, it is a form of a sales tax. And nobody files annual sales tax reports.

Imagine the benefits of firing all IRS personnel and totally eliminating this scourge of American citizenry.

If a VAT tax rate could be set to approximate low, growth-inducing income tax rates, and all income taxes were abolished, I might actually consider being in favor it.


Brad said...

Dear C,

0-bama would turn a dark shade of red to even imagine firing the IRS. You know the goal is to have BOTH, just like Germany and France.

C Neul said...


Thanks for your comment.

What was I thinking??!!