“Solutions” to Deficits – The National Sales Tax

In my post What’s the Problem With Government Budget Deficits? I recently wrote:

“Solutions” to Deficits

As I explained, the ultimate damage caused by public budget deficits occurs at that point in time when taxpayers are forced to restrict their consumption and unjustly bear the cost of malinvestments from the past.

Ironically, when you look at the political stage, all you will hear in regards to “solutions” to deficits in the end, will be tax hikes. These are not solutions. They are the ultimate manifestation of the very problem at hand. They are, in fact, the precise opposite of a solution. Keep this in mind whenever you hear politicians talk about deficit solutions.

This guy over at The Atlantic is promptly jumping in to pose as a hapless example of what I described:

Here’s why we need [a national sales tax]: If you think the deficit looks bad now, wait a few years. Rising health care costs for retired baby boomers will push U.S. debt levels past their World War II-levels. But whereas WWII ended and we owed that debt to ourselves, our entitlement system is woven into American life and we owe half the resulting debt to foreign countries. Approaching this challenge will require some combination of robust growth, spending cuts, entitlement reform and more tax revenue.

Thanks, oh guy who doesn’t get it :)

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April Tax Revenue Falls – New Taxes To Come

Back in January I wrote:

The United States government will be facing an unprecedented tax shortfall in the years to come. Declining corporate profits, asset values, and skyrocketing unemployment will cause the tax base to fall flat. It will most likely become evident in April of this year and get progressively worse in the years to come.

Well, April’s number are in now … USA Today writes IRS tax revenue falls along with taxpayers’ income:

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. “It illustrates how severe the recession has been.”

For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago.

“These are staggering numbers,” Lynch says.

Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years.

What we are seeing now is only the beginning of a massive shortfall. I followed up on the article above in February:

Now that we have updated figures on coming expenses it’s time to update the deficit predictions:

* $1.65 trillion for 2009
* $1.6 trillion for 2010
* $1.95 trillion for 2011
* $2.2 trillion for 2012

If President Obama keeps spending like this, and really wants to cut the deficit in half by 2013, he will at one point be faced with no other choice but to raise taxes on all Americans, rich, middle class, and poor. This is of course nothing new. Taxes have been rising in the US for the past century.

Taxes on all Americans, rich, middle class, and poor? Like a national sales tax? No way, our dear legislators would never consider such a rip off, would they? Why, sure they would … Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look:

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

What caught my eye was this picture and comment in the article above, giving us an idea of which income group will suffer most from a national sales tax:

Demonstrators called for a suspension of value-added tax on food in Manila last year. Such a tax is attracting real interest among U.S. policymakers. (By Romeo Gacad — Agence France-presse Via Getty Images)

… I wish I wasn’t so sure that under this clueless and misguided Congress, this new tax is bound to happen sooner or later; unless the people raise hell over it and unconditionally reject all the tired, dull, boring, and false excuses and lies that President Obama, Nancy Pelosi, Harry Reid, and all their obedient Congressmen and Senators will try and come up with.

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