Dec 14, 2009
As if life wasn’t hard enough, legislators now want to charge Americans what else but more taxes. A nationwide tax on all goods and services is being considered to plug the runaway federal deficit. The war in Afghanistan, bank bail-outs, and even the aid to many third-world partners are definitely taking its toll. The question is, would it be right to impose taxes on individuals who have nothing to do with the deficit anyway?
Many members of Congress want to junk the proposal, preferring to cut back on spending or impose higher taxes on the rich. The former might be the best idea. Taxing the rich might sound attractive to some but it might not be good over the long term. It will pull the upper class downward instead of lifting up the poor and the lower middle-class to achieve equity in the economy.
But while it is easy to say that it is just not right to impose additional taxes on struggling Americans who are already dealing with a tough labor market and health care costs, it might be inevitable. Bad decision making has made it necessary. According to Charles McLure who worked for the Reagan administration, “We have to start paying our bills eventually.”
The favored tax route is the value-added tax (VAT). Currently, the US system uses the sales tax wherein only the final product or service is taxed. The VAT system will impose taxes on every step on the production chain. Though this system works well in many other countries, it might erode US competitiveness further because it will drive the prices of everything upwards.
The current system should generate enough revenue to sustain the economy but it doesn’t. Curbing unnecessary expenses might provide is important because it will improve the economy without eroding the country’s competitiveness in the global marketplace. However, with the problems today and with the cost of US health care being sky high, it might no longer be enough.
Among the legislators who invoked the VAT system include Nancy Pelosi, John Podesta, and two former Fed Chairmen: Paul Volcker and Alan Greenspan. Their decision might be right given the current conditions but it wouldn’t have been necessary if legislators and regulators haven’t made such as mess of things in the first place. Why should Americans have to pay?
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- America’s Uncounted Debt