December 11, 2009

Value-Destroying Taxes

Filed under: Neo-feudalism, Reformism Can't Work — Tags: — Russ @ 9:17 am


This NYT headline says it all: “Many See the VAT Option As A Cure For Runaway Deficits”.
For deficits, no less!
The article is clear about the way things are. Spending cuts? Not on any of the big-ticket piracy. Higher taxes on the rich? Don’t be silly.
No, as they quote a Reagan administration economist: “This strikes me as the best and most obvious way of doing it.” I’m sure it does.
The piece points out that, like universal health care, every civilized country has a VAT. Since this is not a civilized country, we should look to what happened with health “reform” to find the pattern for what would happen here with a VAT.
As was proven there (and is being proven with finance “reform” as we speak), any so-called “reform” proposal will actually be a Trojan horse. It will be disaster capitalism, a phony reform vehicle used as an anti-public, anti-reform weapon.
How will a VAT be weaponized? It’s already regressive. And look at this: “Invoking such a tax would probably require an overhaul of the entire federal tax code.” Yes – the advertised idea would be to replace “middle” class income taxes with the VAT. Of course it’s doubtful that this would even happen. In practice they’ll just lay the one atop the other. (In NJ, for example, the income tax was first instituted in the 70s with the promise that it would replace property taxes. Instead, they both exist, and both have risen tremendously.)
And what would happen with a phony “overhaul” of the tax code? It would be the goriest lobbyist feeding frenzy to date. Every kind of special interest, criminal, and parasite would win. Only the people would lose. They would lose hard, they would lose long, they would lose like they’ve never lost before. They would pay, pay, PAY.
And they want to use the loot to pay down the deficit!
Just as the obvious and only health care reform is single-payer, so the obvious and only tax reform is to render the entire code steeply progressive. That’s what the civilized countries did.
How about this for civilization: While progressively steepening the tax code in general, institute a VAT dedicated exclusively to paying for single-payer health care. In that context, the VAT would make perfect sense. This would also be in line with its anti-luxury consumption, pro-saving thrust.
But that’s rational, that’s moral, that’s civilized. Therefore we won’t do it.
[Appendix. On an different topic, but since the article made me think of it:
It gives this brief tutorial on how a VAT works:

Imagine the production of a new dress, in three steps:

¶A fabric store sells a tailor enough silk to make one dress, at a total price of $10 before taxes;

¶The tailor sews a dress and sells it to Macy’s for $30 before taxes;

¶Macy’s then sells the dress to a shopper for $50, before taxes.

What’s wrong with this picture? It doesn’t answer the obvious question, why do we need “Macy’s” at all? What value does it add? (This applies to big box stores like Walmart most of all, but really to all department stores.)
It’s best never to have Macy’s in the first place. That already means a society has reached a destructive level of complexity. This is because the moment Macy’s is entrenched enough it’ll simply use its entrenched position to extract maximum rents from both the tailor and the shopper. That’s the Law of Feudalism.
Sure, for a few decades it might have looked like department stores were adding value. But in the long run they were malevolent. To trade real jobs, greater self-sufficiency, community, self-respect, freedom, for the sake of temporarily lower prices (for crappier products, and which in the long run won’t even be cheaper), was never a good trade to make. Every supporter of “free” trade was and is a criminal against humanity.
The only way to maintain long run social value was never to have “Macy’s” in the first place.]


  1. Don’t you know only little people actually pay taxes; that taxing high net worth individuals and corporations will undermine investment? That the rich create economic growth through entrepreneurial risk taking? Next you’ll be suggesting that banks should actually lend money. Before you know it, socialism.

    You think VAT is the looniest scheme soon to be trotted out? I’m expecting to see Steve Forbes in a four foot dunce cap and an earmine robe making the talk show rounds.

    Comment by jake chase — December 11, 2009 @ 5:16 pm

  2. I still recall how funny Forbes’ campaign was. How his one and only answer to literally every question on any issue was “flat tax”.

    Comment by Russ — December 12, 2009 @ 3:16 am

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