The Tax Seen As The Cure to the National Debt In The United States

Given the title of this site, you know how I feel about the national debt. The cure will be a combination of tax increases and spending cuts. The cuts are unclear, but the tax is already on the horizon.

The tax and spend group of politicians, economists and journalists are all bleating a familiar call. Our country has one of the lowest tax rates in the world. Perhaps this is why we also one of the strongest economies and standards of living, but they don’t like to talk about that!

Regardless, the bleating is being heard time and again as a foundation to future action. The future is coming closer and closer. What is it? The value added tax. This is more or less a national sales tax, one that would not replace income tax. Instead, it would be added on top of it. Here’s a classic example of foreshadowing by Paul Krugman of the New York Times:

“So America has a long-run budget problem. Dealing with this problem will require, first and foremost, a real effort to bring health costs under control — without that, nothing will work. It will also require finding additional revenues and/or spending cuts. As an economic matter, this shouldn’t be hard — in particular, a modest value-added tax, say at a 5 percent rate, would go a long way toward closing the gap, while leaving overall U.S. taxes among the lowest in the advanced world.”

Ah, just another tax. Let’s consider the implications. I live in San Diego, California. Beautiful place to live. Terrible place to live financially. We have one of the highest state income tax rates in the nation. My corporation? I have to pay tax on that as well as $800 a year for the “privilege” of doing business in California. On top of this, I have to pay state sales tax. Throw in federal tax and it gets pretty tough. Throwing another 5 percent tax on top of all this is going to kill me. Oh, and you know it isn’t going to stay at 5 percent for very long!

Is the VAT the way to go when dealing with the national debt? You’ll have to decided for yourself, but we are going to strangle our economy if we add to many.

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