Thursday, April 22, 2010

Paul Volcker: VAT "not as toxic an idea". What?

Proof again that the geniuses in Washington DC are not.

Paul Volcker, current Whitehouse adviser and former Federal Reserve Chairmen under
Presidents Jimmy Carter and Ronald Reagan says the value-added tax (VAT)...
"was not as toxic an idea." (Reuters)
Not toxic to whom? Politicians and Corporations? Ex-fed chairmen?

It is toxic to me.

I have to say that I believe these people in Washington are totally out of touch with the American people and the American way of life. Never once have they considered that the deficits and debt are a result of their uncontrolled spending or that if they want to reduce deficits and debt, cutting spending might work.

Just say "no" to spending.

At least the US Senate was thinking with 85% clarity, when they voted 85 to 13 opposing a VAT in a nonbinding "sense of the senate" bill. (Read about it here)

There many reasons why a VAT would be a bad thing. The top four are...

1. Inflation
2. The poor are the hardest hit
3. It is super insidious
4. Why do we need another tax?

It is inflationary because it adds to the cost of everything that congress wants to tax. All businesses pass along any cost of doing business to the customer. Always. A 3% VAT would at least 3% to the cost of vehicles, gasoline, housing, food, transportation, clothing and food. If they make it 6% then everything goes up that much. The government already jaacks up the price of everything with a 35% corporate tax. The VAT will be added on top of that corporate tax (the same way they do it in Germany)

The poor would be hit hardest because they have less income to spread around to the different products and services needed. While a loaf of bread doesn't even show up on the radar of a wealthy person, it becomes decision time for poor family. (Do we get the whole wheat @ $4.00, or white at $3.25?) This same scenario goes to everything they need and choices they make to stretch the money out to cover everything they need, and would no doubt would adversely affect children's birthdays and Christmas. (And they describe Republicans as "mean spirited").

I, and many others, believe that a VAT is very very insidious as it is a tax hidden that consumer never sees. The way a VAT works is the government collects a tax each time "value" is added to a product.

Take oil pipe for instance. Oil comes out of the ground through steel pipe 2- 3.5 inches in diameter.
To make the final product iron ore goes through many "value adding" processes. At each improvement, the value added tax is slapped to it. After each process that adds value, the VAT is added to the cost. When I worked at US Steel the the major steps went like this.

1. Iron ore is dug up and shipped to US Steel (Lorain Cuyahoga Works) and converted into blocks of steel - Value Added
2. It is sold to the Blooming mill and turned into bar stock and billets -
Value Added
3. Billets are sold to the Pipe mills who then sell it to the lapping mill (a department of the Pipe Mill) -
Value Added
4. The billets are extruded into 25 to 30 foot lengths of seamless pipe -
Value Added
5. The pipe is sold to Number 2 lap, where threads are added to both ends of the pipe. -
Value Added
6. The pipe is sold to 3 Seamless, where a coupling is screwed on to one end of the pipe -
Value Added
7. The pipe is sold to the shipping department for final sale.

The oil companies who buy the pipe will not know how much VAT is being paid on the pipe, they just buy it at their best price and add the cost into calculating how much to sell the oil for (which has its own value adding process), and it all comes out of your pocket.

You may never know when the VAT rate is increased by congress (I was going to say 'when it goes up or down', but that would be crazy talk), unless you are watching Fox News who will tell you when they change the rate.

Why do we need another tax on top of all the other taxes we pay now? Let's have a look at how much money we are sending to government.

If you are working, own a home & pay utilities, drive to work, and live in America, you hand over about half of your income to all levels of government.

You are paying income tax, payroll tax Medicare & Social Security), sales tax, property tax, state & federal gas taxes, fees for services (I use the term loosely), corporate taxes (that's right, it gets passed along as part of doing business), excise taxes on various services (tanning salons comes to mind), room taxes if you travel, airport taxes, communication taxes on your telephone, cell phone and not-so-smart phone, internet access taxes, connection taxes, use taxes, etc., etc., etc.

And all of that does not include a VAT.... yet.

Contact your representatives and the president and tell them you are supporting someone else if they try and add a VAT to the cost of living in this country.

No comments:

Post a Comment

Keep it clean. Comments are not censored, but will be removed upon discovery of foul or unlawful language (such as threatening politicians with bodily harm).