VAT Chance: The National Sales Tax Must Be Stopped
Washington elites are increasingly ‘consumed’ with the idea of levying a consumption tax – that is, a national sales tax. (Though they almost all use the obfuscatory term “value added tax,” or even more dishonestly, “VAT.”) The New York Times columnist David Brooks, that epitome of moderate and considered opinion, has floated the idea, as has fiscal discipline maven Bruce Barlett. This weekend, Washington Post columnist David Ignatuius, another “moderate” he, used an appearance on the Chris Matthews Show to claim that America needs a national sales tax to “get us out of the mess.” True/Slant’s own “American Tory” ED Kain is also a fan.
Alas, the imposition of a national sales tax is a nasty, noxious proposal.
The national sales tax should be resisted for a number of reasons. First and foremost, a national sales tax will do great harm to our economy. (Goodbye, green chutes!) Yet more distressingly, the national sales tax represents an attempt to balance the federal budget on the backs of the poor. And, perhaps most disturbingly, the current sales tax bubble is emblematic of the anti-consumption, austerity-crazed mindset which is currently all the rage among the elites.
Over 70% of the American economy is based on domestic consumer spending. Unlike other rich countries such as Japan and Germany – countries that rely on exports to thrive – America’s job and production machine is dependent on the consumer’s willingness to spend. That is to say, somewhat paradoxically, spending money actually generates wealth in America. The jobs, earnings, and production that consumer spending results in is the engine that powers our economy – and the engine that will get us out of this nasty recession. Why, in this climate, should the government punish consumers with a punitive national sales tax? Why attempt to discourage spending, when spending is what will save us?
But let’s leave the quotidian economic effects of the VAT aside for a moment, and consider the ideological implications of the proposal. There can be little doubt that the United States is in some degree of fiscal peril, and that some steps to raise revenue need to be undertaken. A raise in income tax rates, for example, would seem a prudent move. Income, in itself, generates no wealth and accomplishes nothing. What’s more, those with the highest income are those, inherently, with the most ability to pay a greater degree of taxes. A progressive tax system would be one in which those with the highest income bore the highest degree of the tax burden.
Sales taxes, on the other hand, are inherently regressive – the poor and middle classes feel a disproportionate amount of economic pain when subjected to them. It’s little wonder that ultra-conservative Alabama has the nation’s most regressive tax system – that is, the state has low income and property tax rates, and punishingly high sales taxes. This frankly immoral structure means that poor Alabamians pay a woefully disproportionate amount of their money to the government, while the rich get off unmolested. In sum, then, proponents of the national sales tax want to solve the government’s budgetary problems by sticking it to the poor. They want consumption to be taxed, not income. They want the federal tax structure to resemble Alabama’s.
Broadly, the proposal to levy a national sales tax represents another jeremiad in the political elite’s war on consumption. The distrust of consumption used to primarily be the province of the anti-materialist left – those who trumpeted “buy nothing day,” and the “DIY” ethos. These days, it’s firmly in the mainstream. David Brooks pens homilies to austerity, Michelle Obama lectures sternly on not letting the kids eat too much tasty grub, and scribes at Slate magazine hector us about cutting energy usage. Levying a sales tax is just another attempt to coerce Americans into “consuming” less.
The national sales tax – or sorry, the “value added tax” – is a bad idea indeed. The “values” it embodies are truly reprehensible.