I've been trying to get around to writing on this for a while now that it's the part of European socialism we haven't been saddled with yet. But the continuing march of the Online Tax Revolt (if you haven't signed up yet, there's something wrong with you) toward engagement in Washington on
Oh, before I get to describing the antithesis of the FairTax, here's the video of the day (and apologies for it being with Huck-a-duck):
In short, it's a matter of finding something better than the mess we have now. And NEVER letting the government saddle us with the VAT.
Now I know there are a few of you ready to yell "What the FUDGE is a VAT?" (except you didn't use the word fudge). This is the Value Added Tax. Now I know you'd like to know the difference between the VAT and something like the FairTax.
Well, without too much detail (lest I write pages), the FairTax is a single retail sales tax (specifically, a consumption tax), applied on the final retail price of all new purchases, and replaces ALL other taxes out there (including the approximately 22% embedded taxes already in everything we buy, leaving retail prices effectively the same). You can debate the details somewhere else, because this is the gist of it, and enough information to contrast it with the VAT.
The VAT is also in the realm of a sales tax. However, first and foremost, it is ANOTHER TAX, something that would be added not to replace funding for the government, but to supplement and pay for more shit (like government-supplied health care and studies why the government is in massive debt).
So let's look how this works. In contrast to a retail sales tax, the VAT is assessed on all transactions. Businesses can then recoup the amount of VAT they already paid on the item when they bought it. In the end, the tax is assessed on the final consumer anyway, except that there's no sane way to actually figure out the VAT on a particular item (whereas a retail sales ax would be a specific percentage which in the case of the FairTax, would be (as proposed) 23% inclusive (when compared to the current Income tax that it eliminates). Again, the actual percentage, while debatable, could easily be calculated with paper and pencil.
In contrast, let's look at how you'd figure a VAT. First, a farmer buys seeds, is assessed the VAT. From Wikipedia:
With a 10% VAT:
The manufacturer pays $1.10 ($1 + $1x10%) for the raw materials, and the seller of the raw materials pays the government $0.10.
The manufacturer charges the retailer $1.32 ($1.20 + $1.20x10%) and pays the government $0.02 ($0.12 minus $0.10), leaving the same gross margin of $0.20.
The retailer charges the consumer $1.65 ($1.50 + $1.50x10%) and pays the government $0.03 ($0.15 minus $0.12), leaving the gross margin of $0.30 (1.65-1.32-.03).
Now, imagine that assessed on something that goes through 6 manufacturers. And imagine the paperwork added for each initial producer, manufacturer, wholesaler, middleman, and retailer to comply with YET ANOTHER TAX.
And then we get to decide what does and what doesn't get the VAT. Do we assess it on health care? Food? Other needs where the VAT will instantly impact the poor? And does that mean we have to invent another tax "credit" to offset the tax for the mooching class (Obama voters)?
Again, my goal in general is the reduction of the size and scope and power of the Imperial Federal Government, including radical tax reform. If anyone can explain how a VAT fits in that, I'd be really interested.