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Monday, April 12, 2010

Everything You Buy is About to Become 20% More Expensive

Everything you buy is about to become 20% more expensive...

I'm not kidding. The latest idea out of Washington is to pay for its insatiable appetite for spending with what's called a "Value-Added Tax."

It's like a huge new national sales tax, on everything. In simple terms, the difference is that with a sales tax, the consumer pays it. With a "VAT," the manufacturer pays it. The consumer won't see it in the price on the shelf or on their receipt.
Politicians love this tax because it's a stealth tax... You can't see it when you buy something, but they still get their money. And unless you make your voice known, chances are excellent we'll eventually have a Value-Added Tax here.

The thing is, making things 20% more expensive here and giving that money to politicians won't save America. It'll make us less competitive. For Exhibit A, consider the state of European governments right now...

Greece, for example, has a VAT of 21%. Its government is bankrupt. The Value-Added Tax didn't save Greece.

Italy and Portugal have a VAT of 20%, and they're only a little less bankrupt than Greece.

Astoundingly to me, the Value-Added Tax in France has now crept up to a full 50% of France's government revenues. So how are things going in France with a Value-Added Tax?

France is unable to compete in the world. Unemployment is terminally high. The unemployment rate is now 10% in France. In 2005, the unemployment rate was 10%. And back in 2000, unemployment stood at 11%. Like I said, it's terminal...

Clearly, the system is not working. So why is the U.S. government in such a hurry to adopt it?

The Wall Street Journal explained it yesterday: "Taxes on the rich can't begin to finance the levels of new spending that the current government has unleashed... "

And foreign governments have been less willing to buy our government bonds lately. So the government needs a new source of a lot of money.

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