| Waste
Tax preparers are part of an $84B industry, of which $41B goes to paying its 1.3M employees. Much of this $84B could go into the Treasury if a simple VAT replaced the very complex Income Tax.
Individuals and small businesses would benefit from a simple VAT. Big business unfairly benefits from new tax incentives; their large legal teams reduce the cost of being the IRS "guinea pig."
Fraud
Corrupt congressmen can hide a tax law "tree," benefitting one donor, in the "forest" of complex rules.
We can improve transparency (and fight fraud) by replacing the current system with a VAT. We will promote good behavior with direct subsidies that are easier to see, track, and take credit for.
Regressivity
VAT critics are right to say it hurts the poor because it is regressive - the poor spend more of their income and would pay relatively more tax.
Tax Dividend
This is true but easily addressed through a version of the Earned Income Tax Credit. Just pay everyone a flat "tax dividend" each year or each quarter:
• Make the dividend large enough to replace much of the VAT the poor pay
• But small enough to make it irrelevant to the well-off
We pay everyone the dividend, including the rich; to avoid complex rules lawmakers can manipulate to help their donors. A universal dividend is an incentive to "go public," making it easier to bring everyone onto the voter rolls and make them full participants in the "American Dream."
Conclusion
The Bush depression puts Obama in the difficult position of spending $1.75 for every $1.00 in income. A full recovery will bring spending down to $1.30 for every $1.00 in income.
The Value Added Tax (VAT) can raise the necessary income, increase transparency, reduce waste and fraud, and maintain tax progressivity if we introduce a "tax dividend."
The left-leaning Brookings Institution promotes the VAT:
"We will get a VAT when Democrats realize [it is] a revenue machine... three cheers for Paul Volcker!"
A simple VAT can restore nearly $84B to the government by reducing the need for accounting and tax preparation services.
The VAT can restore hundreds of billions by making it hard for Republican lawmakers to hide favors for their donors.
Finally, a fixed tax dividend paid to every taxpayer (avoiding rules that can be manipulated by Republican lawmakers) restores progressivity by refunding much or all of the tax a poor man pays while having little or no impact on the rich.
A flat payment eliminates the tax bias towards large families - reducing the population growth rate. |
