Hurricane Alley… by J. D. Longstreet

America: Prepare For An Avalanche of Taxes!

Posted in Uncategorized by J. D. Longstreet on March 29, 2010

 

America: Prepare For An Avalanche of Taxes!

A Commentary by J. D. Longstreet

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Occasionally, someone who really knows what he or she is talking about actually speaks.  Such is the case in the article by Timothy P. Cahill formerly the Democratic state treasurer of Massachusetts. (He is now running for governor as an independent.)

In an article titled: “Timothy P. Cahill: Romneycare’s failure teaches need to repeal Obamacare” Mr. Cahill says the following: “Despite our warnings about the damage done by RomneyCare, the President and Congressional Democrats ignored the will of the American people and passed the bill anyway. Now we must send a message to Congress loud and clear: “Repeal and replace ObamaCare.”  Mr. Cahill goes on to say: “The only reason RomneyCare has survived at all is that we have been propped up by the federal government over and over again. But this begs the question of who will bail out the federal government when ObamaCare goes into effect.”

Finally, Mr. Cahill says this: “There is still time to repeal and replace this bill before it is implemented. That’s exactly what we have to do-before it is too late.  You may read the entire article HERE.

So – how ARE we supposed to pay for ObamaCare?  TAXES, TAXES and MORE TAXES!

In an article at The Washington Examiner entitled: “Slow-growth Europe, here we come” author Irwin Stelzer makes the following statement: “His (Obama) fiscal plan is to raise taxes; his political calculation is that Americans will come to love their new entitlements and rank him with Franklin Delano Rooseveltin their pantheon of heroes.

Mr. Stelzer goes on to say: “Next on the president’s list is the financial services sector: More and in some instances better regulation of banks, procedures for winding down busted banks without massive taxpayer bailouts, consumer protection, control of bankers’ compensation systems. On to the energy and education sectors, both also on Obama’s “transformation” list.  Mr. Stelzer’s conclusion is as follows: “When the transformation of America is complete, the country will have been moved in the direction of the European social welfare state. You may read the entire article HERE.

Months ago we warned that Americans should prepare for a new “VAT TAX.”  That is a Value Added Tax.  I don’t think anyone took us seriously at the time — no matter that this scribe was dead serious!

In any event, rest assured that the President’s Commission on Fiscal Reform would suggest a European style VAT tax.

So – what the heck IS a VAT Tax?  Well, you’d better sit down for this one:  A VAT tax is a Value Added Tax.

“Value added tax (VAT), or goods and services tax (GST) is a consumption tax (CT) levied at each stage that value is added to a product or service. VAT is an indirect tax, in that the tax is collected, and paid to the state, by someone who does not bear the cost of the tax. In contrast to sales tax, the number of steps there are between the first producer and the final consumer is neutral in terms of tax charged, whereas sales tax is levied on total value at each stage, resulting in a cascade effect (at each stage tax is levied on the tax levied at the previous stage). Although true in theory, in practice, in the U.S. and many other countries, sales tax is charged only at the point of final sale to the final consumer, with no sales taxes at intermediate levels.

Ok, here is an example comparing a VAT TAX to a sales tax (Oh, I got this from Wikipedia!  You may read the entire article HERE.)

Consider the manufacture and sale of any item, which in this case we will call a widget. In what follows , the term “gross margin” is used rather than “profit”. Profit is only what is left after paying other costs, such as rent and personnel.

Without any tax:

  • A widget manufacturer spends $1.00 on raw materials and uses them to make a widget.
  • The widget is sold wholesale to a widget retailer for $1.20, making a gross margin of $0.20.
  • The widget retailer then sells the widget to a widget consumer for $1.50, making a gross margin of $0.30.

With a North American (Canadian provincial and U.S. state) sales tax:

With a 10% sales tax:

  • The manufacturer pays $1.00 for the raw materials, certifying it is not a final consumer.
  • The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same gross margin of $0.20.
  • The retailer charges the consumer $1.65 ($1.50 + $1.50×10%) and pays the government $0.15, leaving the gross margin of $0.30.

So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The retailers have not paid any tax directly (it is the consumer who has paid the tax), but the retailer has to do the paperwork in order to correctly pass on to the government the sales tax it has collected. Suppliers and manufacturers only have the administrative burden of supplying correct certifications, and checking that their customers (retailers) aren’t consumers.

With a value added tax:

With a 10% VAT:

  • The manufacturer pays $1.10 ($1 + $1×10%) for the raw materials, and the seller of the raw materials pays the government $0.10.
  • The manufacturer charges the retailer $1.32 ($1.20 + $1.20×10%) and pays the government $0.02 ($0.12 minus $0.10), leaving the same gross margin of $0.20.
  • The retailer charges the consumer $1.65 ($1.50 + $1.50×10%) and pays the government $0.03 ($0.15 minus $0.12), leaving the gross margin of $0.30 (1.65-1.32-.03).

With VAT, the consumer has paid, and the government received, the same as with sales tax. The businesses have not incurred any tax themselves. Their obligation is limited to assuming the necessary paperwork in order to pass on to the government the difference between what they collect in VAT (output tax, an 11th of their sales) and what they spend in VAT (input VAT, an 11th of their expenditure on goods and services subject to VAT). However the are freed from any obligation to to request certifications from purchasers who are not end users,and of providing such certifications to their suppliers.

 

Note that in each case the VAT paid is equal to 10% of the gross margin, or ‘value added’.

 

The advantage of the VAT system over the sales tax system is that under sales tax, the seller has no incentive to disbelieve a purchaser who says it is not a final user. That is to say the payer of the tax has no incentive to collect the tax. Under VAT, all sellers collect tax and pay it to the government. A purchaser has an incentive to deduct input VAT, but must prove it has the right to do so, which is usually achieved by holding an invoice quoting the VAT paid on the purchase, and indiciating the VAT registration number of the supplier.”

OK – Complicated enough for you?  the bottom line is this:  There will be a humongous increase in the price of everything you purchase, which is covered by a VAT tax. It ain’t gonna be pretty.

Charles Krauthammer has authored a piece entitled: “The ‘value added tax’ is coming to America”  In his article Krauthammer says: “People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude — if you exempt food the yield would be more like $900 billion).

It’s the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent. (Read more from this Tulsa World article at HERE. )

You know I could not help but consider that God, Himself, only asks 10%!  But then, Obama isn’t God, just an uberhuman, right???

There is no doubt that a large percentage of Americans have NO IDEA what they got themslevs into with ObamaCare. Many will only get it as they stand in line for several hours just to buy toilet paper.

Yes, America is now a socialist state very much like the old Soviet Russia was and the modern European states are today.

Pity.

J. D. Longstreet

 

 

 

 

 

 

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