Your Wallet in a VAT?

On the heels of tax day (hat tip to Martin Lindeskog) comes a revealing editorial discussing the fact that, apparently, some "fiscal conservatives" are throwing in the towel on reducing government spending and are proposing, of all things, a value-added tax (VAT)!

I will excerpt and comment on the most important parts of this article, but you should read it all. Why? Because this article shows just how far the political discourse on economic matters has shifted in our country from the Reagan era, when Republicans still used to talk about eliminating whole federal departments from time to time.

I have blogged about other recent examples of articles showing this shift: (1) the recent push for more enforcement by the IRS, (2) a possible stealth income tax about to be imposed in Texas, and (3) in what now passes as good news, one proposal to replace the income tax with a sales tax. The worst thing about the first two of these is the fact that these are both Republican initiatives. So read this article. Not knowing about bad news won't make it go away.

The editorialist, one Froma Harrop, says that "A VAT is basically a national sales tax." This is partly correct, but read here for more. Not too surprisingly, it was invented by the French. I guess if you're going to surrender on cutting government programs, you should Frankify all the way....

Grab a barf bag and read on about the surrender of the American fiscal conservatives.

Small-government conservatives are probably the saddest new converts to the VAT idea. They bought into the theory that tax cuts would force reductions in government spending. Lower taxes, they said, would "starve the beast."

But the Bush administration's spending spree has them utterly demoralized. As an example of their despair, conservative economist Bruce Bartlett bitterly attacked President Bush for ramming a $23 trillion expansion of Medicare "down the throats of the few small-government conservatives left in the House."

Combined with lower taxes, the steroidal spending has sent federal deficits into a dangerous upward spiral. Eventually, the financial markets will force discipline on these reckless fiscal policies — and in ways that may prove most unpleasant for the economy.

Responsible conservatives don't want an economic meltdown, so they are throwing in the towel. Bartlett wrote that he and other conservatives now "conclude that starving the beast simply doesn't work anymore." A VAT would be the best of the ugly alternatives.

And so we have shrink-government types promoting the very tax that Old Europe uses to support its cradle-to-grave programs. A minute of silence for small-government conservatives.

Harrop can barely disguise her glee. She's worse earlier in the article where she tries to sell the VAT to "working stiffs." And even worse than her love of the nanny state is the fact this tax would not necessarily replace the income tax: "Some conservative reformers want to completely replace the income tax with a VAT." Note the word, "some." Harrop, of course, thinks you'll fail to notice that, judging by the next excerpt from the article.

And that's what happens when you don't make a strong, positive, and -- above all -- moral case for eliminating government programs. Your hopes to "starve the beast" will come to naught the moment someone like Bush, who sees the "beast" as a pet to be fed and taken care of decides to do just that.

You've already conceded the moral high ground, so the battle never was about eliminating government programs. And since you were hoping to "starve the beast" (i.e., make cutbacks by inertia) you never really made a compelling case to rein in the growth of government programs either. Now, thanks to George Bush and the complicit "allies" of the fiscal conservatives on the religious right, the initiative in this battle has been seized. (And fiscal conservatives are worried about their alliance with the religious right faltering? It's already gone!)

The goal is now to use expansion of the federal nanny state to cut into the Democratic voter base. The momentum is now for expanding the federal government again and all these so-called "small-government conservatives" have to offer is their take on how we, the taxpayers, are going to pay for all of this? This is a far, far, cry from challenging Bush et al. on whether we should have to pay for any of this at all.

With memories of wrestling with form 1040 still fresh, Americans should be open to considering a vastly more simple way to pay taxes. In the name of both simplification and fighting tax evasion most of India recently introduced a VAT. The tax is controversial, but it will stick.

What great news! Obviously, big-government liberal Harrop had a reason for putting out her column when she did. The VAT will get no serious political opposition from our elected officials -- unless their recently-traumatized constituents object. (But remember, it's almost a sure thing that the VAT will be in addition to the income tax....)

So now we're to emulate freaking India? We are now to become concerned, not with reducing our taxes, but with having a "simple" system that will "fight evasion."

America, land of the simple, home of the compliant.

That's what we'll have unless we change the direction of this debate pronto.

-- CAV

P.S. For Related Articles: In addition to the posts Martin Lindeskog recommends in the comments, check out his excellent post, "Has the Religious Right Taken Over the GOP?" over at his blog, Ego. Also, see Capitalism Magazine for a pro-flat tax article. (Of course, I see a flat tax as merely a step in the right direction.)

Updates

Today: Deleted an incorrect statement about what a VAT is.
4-18-05: Added PS pointing to related posts.