Tag Archives: VAT


The Congressional Budget Office has just released a report that says it is feasible. The first question I what sort of devious person could come up with such an idea? A Democrat, of course.

Kent Conrad (D-ND), Chairman of the Senate Budget Committee is exploring it as a way to raise money in response to Transportation Secretary Ray LaHood’s report to the Committee that the Obama Administration wants to spend 556 B dollars on transportation over the next six years. [Note the 6 yr presumption]. A VMT (Vehicle Mileage Tax) could be the answer. The idea is to apply it in addition to, not in place of, the gasoline tax.

Here is how the CBO’s lengthy report says Big Brother could work. First of all, every new car would be required to be fitted with a tamper-proof reporting GPS. This would add about $200 to the cost of a car. Every gas station would be required to have a seamless receiving link, a sort of wireless wifi that reads your GPS and adds the mileage tax to the cost of the fuel you buy. Obviously this would take some time to set up. The CBO says 2 years. The only major problem that remains unresolved is how to deal with older cars. Retrofitting them with the snitch boxes would be more expensive and more difficult to make tamper-proof.

If the VAT doesn’t get you, the VMT might. Either way you’re ZAPPED.


The Value Added Tax is an insidious invention we are about to import from Europe. It is like a sales tax in that it is a tax on activity, not on income or profit. It is like a flat tax, or fair tax, in that it cannot be escaped. It is an inflationary tax because it will increase the price of all goods to which it is applied. It is also somewhat of a hidden tax. Let’s explore each of theses facts.

The European Union mandates a standard minimum rate for the VAT each member nation must charge. The standard rate is 15% with allowance for some exceptions. Europeans are the most heavily taxed people anywhere. Income tax rates are roughly comparable to ours; it is the VAT that makes the difference. France gets 50% of their tax revenues from the Value Added Tax.

The VAT is insidious because it is applied at the wholesale level where you do not see it. It is quietly built into the price of everything. It is not in your face the way a local sales tax is. Efforts to increase the rate, or the list of activities to which it is applied do not meet with the same opposition as do efforts to increase income tax rates. Income tax is personal, value added tax is seen as something someone else pays.

Because it is a tax on activity, not income or profits, the justification for it is more convoluted. The concept is that adding value increases wealth. If you buy some lumber for $500 and build a shed with it that’s worth $2,000 you are $1,500 wealthier. The VAT taxes this increase in wealth as though it were income. It is only applied at the business level so you are not assessed personally, but the lumber will cost you more.

The VAT cannot be avoided because it is an indirect tax. It is similar to gasoline in that federal and state taxes are built into the price. Everyone pays it. From members of the underground economy to Bill Gates, they all pay, and pay the same rate.

It is inflationary because it increases the cost to produce, and therefore the price, of a broad array of goods and services. In Europe it is assessed on everything from cell phones to restaurant meals.

It is somewhat hidden. The gasoline tax is again a good example. In most states the tax is right on the pump but do you know what it is in your state? Most of us only care about the price on the big sign we can read as we drive by.

The Value Added Tax should not be confused with the Flat Tax or the Fair Tax. There are similarities and differences, the most significant being the Flat and Fair taxes are replacements for the Income tax, the VAT is in addition to income tax.

Bob B

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