We have unsustainably inflated consumption for years by excessive borrowing for that purpose. We’ve turned around the borrowing. To increase prices now would be a double hit.

Unfortunately, our tax and spend process is out of control. Instead of determining just exactly what services government should provide and then taxing to pay for it, we’ve decided that government should pay for almost everything, which of course is also unsustainable.

IMHO, at some point, sooner or later, we will have to cut back on the welfare state or we’ll be in another depression. Five percent of us cannot support the other ninety-five percent.

Now create a VAT which is generally not itemized as it is added all along the distribution channel, and there will be even less outcrying than there is with income tax and their seems to be little shame in increasing that. Two taxes with appetites of their own.

There is only a logical limit to increasing taxes, there doesn’t seem to be a moral one.

http://publius772000.wordpress.com/2009/05/09/are-we-politicizing-our-financial-woes/

Not saying that there won’t be a tax, but I don’t believe that it won’t cripple wealth production. Whether the tax is taken away from our income or taken out of our pockets as we purchase anything taxable, it still has the same dampening effect on the economy. True, it will give a lot of those folks whose taxes weren’t going to be raised a chance to help pay some government bills, but economically the effect is the same.

It’s in effect a price increase, accompanied with a theoretical increase in disposable income. Except, oops!, there is no theoretical increase in income contemplated, because this isn’t tied to a reduction in income tax rates. So the effect will be awful if it happens, guaranteeing a reduction in GDP.

It has no chance to do anything but “crippl[e] wealth production.” I believe that if Obama installs his profligate spending plans, we have no hope of avoiding “debilitating inflation.” It’s not possible to avoid it simply by changing the form of the tax.

If there were a way to cap income taxes at a much lower rate than today while installing a low sales tax, I could be convinced to support it. The plans you wrote about that the administration may have are more problem, not new solution.

“The fact that they are both applied as a percentage of the price is the only thing they have in common.”

While there may be nothing technically wrong with what you wrote, a VAT is exactly the same as a consumption tax, with the added down side that the tax is collected at each point of its production and distribution life, even before the product is consumed. Collecting a VAT cost more than collecting a sales tax. The VAT must have been invented by tax accountants.

That makes a VAT almost as bad as a property tax.

At least a point-of-sale tax has the advantage of simplicity.

I’m not especially a supporter of the Fair Tax, because I think ultimately it puts businesses in the cross-hairs for the demagoguing politicians. But we shouldn’t unnecessarily assail their position. My personal preference is for a universal flat tax on income*. The more citizens who perceive themselves to be at risk of government abuse, the more citizens who are likely to keep a close eye on government. Moving people off the income tax rolls was one of the few mistakes I think Reagan made.

*The only thing I’d like more than a universal flat tax would be requiring each taxpayers to send his payment to the government each time he gets his pay check. although I might settle for making tax day Nov 1 instead of April 15.

Tax increases by stealth are still tax increases, and it’s getting close to a time of reckoning where Obama and his lackeys are going to have to come clean to the American people and admit what we all already know: “We are the government, we won, and we’re here to soak you for every cent we can get away with.”

Is everything a lie with him?

The complicated part is all the folks seeking the Fair Tax, which is essentially a VAT, will potentially be hoodwinked into supporting something on the promise that the Income Tax will go away. It won’t because, as you point out, it can’t because the government will need the $$….and without it, they can’t modify our behavior along their lines of ‘social justice.’

Yet, the women still spend, spend, spend, like there’s no tomorrow. Credit cards maxed to the hilt and still they spend; and will spend us into bankruptcy because they “own” the printing press.