VAT is neither fair nor responsible

It is interesting how the left will take a politically popular idea and pervert it into something that will only further destroy a country that is already well down the road to serfdom. The latest example is the Obama administration's repeated statements that it is looking into the possibility of a Value Added Tax (VAT). This comes after almost two decades of millions of Americans advocating a "Fair Tax" instead of the current income tax system. Obama's apologists will state that they both are, after all, taxes on consumption. The similarities after that, however, largely evaporate.

The Fair Tax is a system that has been promoted for years by individuals who support limited government and greater voter participation in the political process. Today, less than half of all Americans pay federal income taxes. This reality has been like a continuous cold shower on a population that should be on fire because government is out of control. A "Fair Tax" would be a national sales tax on every good and service. Everyone would know that cost of government at every transaction. Millions of Americans who have been sleeping politically, would come to an abrupt awakening. Centerpiece in this strategy would be that this tax would replace the very destructive and archaic income tax system, which wages a direct war on wealth and job creation.

In addition to waking up a sleeping public to the depth of our fiscal crisis, this law would also allow us to tax illegal aliens in our country and those who are committing illegal activities. Drug dealers, prostitutes, and others involved in illegal actions would now contribute to the government and help pay for the law enforcement designed to keep them in check. Who else should pay for these crimes? Remember, they are all involved in illegal activities; they have their income completely tax free. This reform would allow us to take a financial "bite out of crime."

Then there is the Value Added Tax. Like the Fair Tax, it would tax consumption. In fact, it would tax every single step of the production of every single good. Unlike the Fair Tax, VAT would be in addition to our current income tax system. Furthermore, it is a hidden tax that is included automatically in the price of goods. Where the tax begins and the real price ends, the typical consumer will be unsure.

The National Center for Policy Analysis notes that "The VAT has been in use in European countries since the late 1960s, and has had a strong, negative economic influence, says (Pete) du Pont (former governor of Delaware and current national policy chairman of the organization): Before the European VATs were put into effect, the average tax burden in the European Union (EU) was 28 percent of gross domestic product (GDP), compared with the 25 percent in the United States. By 2006, with the VATs, the EU average tax burden was 40 percent compared with 28 percent in America."

In addition to that,”Average European government spending was about 30 percent of GDP when the VATs were instituted in the late 1960s." Today we see that European "government spending has grown more than 50 percent and now hits 47 percent of GDP." Debt in European government in 2005 "was 50 percent of GDP, compared with under 40 percent in America." The biggest tax of all on Europeans has been on job creation, according to du Pont, "Between 1982 and 2007, Europe created fewer than 10 million new jobs versus 45 million in the United States. Our economic growth was more than one-third faster, says du Pont." That is, by the way, the entire continent of Europe.

Access to revenue does nothing in terms of providing fiscal restraint, as we have seen in the case of VAT or the many tax increases we regularly see in this country. In fact, new taxes and increases in old ones have encouraged governments to tax more. The answer to America's fiscal problems are found in less taxes and, more importantly, less government.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

National Center for Policy Analysis is Idea Central

One of my favorite organizations for years has been the National Center for Policy Analysis. I often find myself too busy to spend time reading their articles or visiting their website, but every time I do they never disappoint. It seems everything I read of theirs provides a "eureka" moment and my understanding of the subject I am studying increases dramatically.

Recently I spent some time on their site and read an insightful article by the organization's Chairman, former Governor Pete du Pont (R-DE). du Pont (photo) was my choice for President in 1988 as the brilliant leader told people the truth about the problems the nation faced and the necessary policies to change the status quo. He told farmers in Iowa that subsidies was actually hurting agriculture both in the US and around the world and he told seniors that Social Security needed to be reformed in order for future generations to be able to benefit. He always told the hard truths, which may be why his candidacy didn't catch on. Even to this day I would gladly get on a Pete du Pont bandwagon.

In his recent article in Opinion Journal (from the Wall Street Journal), the former Governor pointed out that, if they thought things were bad under the Republicans in Congress, wait until the Democrats pursue their policy objectives. The following is a quick summary of two of their goals:

* Social Security. In ten years, Social Security will be paying out more than it is brining in, which will find the system in a crisis beyond rhetoric. We should obviously do something about it today. The Republicans wanted to look at options that empowered individuals to become investors in the economy by being able to have their "contributions" turn into real investments through private initiatives; resulting in an expanding economy, serious return on the money put into the system, and numerous other positive effectives. The Democrats are talking tax increases which will hurt job development when businesses are forced to match Social Secutiry tax and raising the age, which will discriminate against minorities who already suffer from the current system. The Democrats, in essence, desire more of the same policies that have failed for years.

* Tax Increases. The Republicans are opposed to such and point to long term economic expansion and low unemployment as examples of how the recent tax cuts have worked. Not only have they contributed to economic growth, they have led to revenue increases by spurring on taxable economic activity. While the Democrats want to exact huge largesse from every small economic action through excessive taxation, Republicans take a Wal-Mart approach, by making a little off of so much more activity. If the Democrats really want to reduce the deficit, they would never touch the tax cuts. They declare that taxes must go up, no matter how much harm they do. It isn't because of efficiency, but envy; because the Democrats simply seem to despise econonomic freedom.

The former Governor goes on to examine spending increases, protectionism, and more showing a clear difference between the two parties. Because of the President's veto pen and their slim majority in Congress, it is unlikely that the Democrats will be successful in their policy objectives (except for the possibility of reversing the tax cuts and minimum wage increases), but what they will provide through their policy initiatives is a great road map of what the future will be if the Democrats ever win a governing majority and a sobering warning to everyone who would consider such an option.

The National Center is one of the greatest resources of ideas in the public policy market today and I'm glad that it is out there helping to successfully wage a war of ideas.

See How They Run: Observations on the First 08 Republican Debate

The first debate is over and the political season is only beginning. I found Thursday's debate interesting on a couple of levels and walked away with numerous opinions. Here are a few of them:

* The minor candidates really need more forums such as this. It allows them to project an image of equality and most of them are as well informed and articulate as the major contenders.

* Two of the major candidates -- Giuliani and McCain -- were harmed by this debate. They were surprisingly rough around the edges, not the person whom you want on a platform with world leaders representing our interests, and simply did not come across as presidential.

* One of the major candidates, Mitt Romney, definitely benefited. He was articulate, smooth, and poised. If anything he was "too much" of those things. But I believe most were impressed.

* I believe the concept of "who won" is largely contingent on who you wanted to win. I really didn't care. Although I know some of the candidates and am old friends with Duncan Hunter (R-CA), I wanted to see who would win. After the debate I notice I had an article open on one candidate on the Internet and another window on his web page. His answers were the only ones I remembered. That was former Secretary of Health and Human Services and former Governor, Tommy Thompson (photo). He was one of the only candidates who was extremely specific on the issues, offered innovative (even memorable) reforms, and seemed to be more interested in policy than politics.

Thompson reminded me of a candidate I supported in 1988, Pete du Pont (the former Republican Governor of Delaware), who offered "damn right solutions" to the problems America faced. I believe he was right then and if we had listened to him then, we would be in a much better situation today. Unfortunately, most people are interested in politics than policy. Personality more than leadership. I don't think Thompson will catch on any more than duPont, 20 years ago.

So who won Thursday's debate? I believe the answer to that is in the eyes of the beholder. I know who I liked, how about you? I would love your comments.