Tuesday, April 20, 2010

A "VAT" Chance That The Deficit Will Ever Be Reduced

Over the years, numerous countries have implemented the Value Added Tax (VAT) as a means of lowering their high deficits. Initially, the VAT did manage to lower the debt level in each of those countries. But, eventually the debt returned to even higher levels than before and the rate at which the VAT was set just kept being increased. Almost every country started their VAT at 10 percent. Today, most are now at a 20% plus level and expected to go even higher as governments try to fight the worldwide recession.

Initially VATs sounded like the ultimate solution for solving a country's debt problems. However, there is a human component that almost always causes it to fall short of its intended goal. Almost genetically, a politician can't view any new tax as a means of reducing debt. Instead, they only see any new revenue stream as a means of spending more taxpayer money. Politicians see a new tax as the cachet they need to spend more and more money in order to buy votes. The best example of this, today, is Greece who at a 19% VAT is literally at the doorstep of complete financial collapse.

If the U.S. goes with the Value Added Tax, you can expect spending to never stop. Over time, the VAT will continue to be increased with more spending to follow. And, it isn't just me saying this. History has proven it so.

What we need in this country is a mandate that forces politicians into controlling spending. We don't need another tax. We need a Balanced Budget Amendment to our Constitution with financial penalties or even jail time for any politician or politicians who violate that law. Only then will spending and deficits get under control.

No comments: