{"id":21154,"date":"2018-09-15T18:44:46","date_gmt":"2018-09-15T22:44:46","guid":{"rendered":"http:\/\/www.megalextoria.com\/wordpress\/?p=21154"},"modified":"2018-09-15T18:48:17","modified_gmt":"2018-09-15T22:48:17","slug":"value-added-taxes-make-it-easier-to-raise-taxes-thats-why-governments-love-them","status":"publish","type":"post","link":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/2018\/09\/15\/value-added-taxes-make-it-easier-to-raise-taxes-thats-why-governments-love-them\/","title":{"rendered":"Value-Added Taxes Make It Easier to Raise Taxes\u2014That&#8217;s Why Governments Love Them"},"content":{"rendered":"<p><a href=\"https:\/\/supload.com\/r1bKs-iu7\"><img decoding=\"async\" class=\"alignnone size-full\" src=\"https:\/\/i.supload.com\/H1xbFoZjdX.jpg\" alt=\"\" \/><\/a><\/p>\n<p>The value-added tax was first imposed in Europe starting about 50 years ago. Politicians in nations like France approve of this tax because\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2016\/02\/05\/more-arguments-against-the-value-added-tax\/\">it is generally hidden<\/a>, so it is relatively easy to periodically raise the rate.<\/p>\n<p>And that\u2019s the reason I am vociferously opposed to the VAT. I don\u2019t think it\u2019s a coincidence that the burden of government spending\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2017\/01\/04\/concerns-about-theborder-adjustable-tax-plan-from-the-house-gop-part-ii\/\">dramatically increased in Europe<\/a>\u00a0once politicians got their hands on a new source of revenue.<\/p>\n<p><a href=\"https:\/\/i1.wp.com\/freedomandprosperity.org\/wp-content\/uploads\/2017\/01\/fig-1-vat-spending-600x386.jpg\"><img decoding=\"async\" src=\"http:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/09\/figure-1-mitchell.jpg\" alt=\"\" data-udi=\"umb:\/\/media\/fd6963b945374660aebde42c79cbd23f\" \/><\/a><\/p>\n<h2 id=\"link-0\">Why the VAT Is a Bad Idea<\/h2>\n<p>Simply stated, I\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2015\/03\/22\/the-case-against-the-value-added-tax\/\">don\u2019t want that to happen<\/a>\u00a0in America.<\/p>\n<p>Now I have new evidence to support that position.<\/p>\n<p>We\u2019ll start by crossing the Pacific to see what\u2019s happening in Japan, as\u00a0<a href=\"https:\/\/www.reuters.com\/article\/us-japan-economy-abe\/japan-pm-abe-says-will-raise-sales-tax-by-all-means-nikkei-idUSKCN1LK02L\">reported<\/a>\u00a0by\u00a0<em>Reuters<\/em>.<\/p>\n<blockquote><p>Japanese Prime Minister Shinzo Abe vowed to proceed with next year\u2019s scheduled sales tax hike \u201cby all means\u201d\u2026 Abe said his ruling Liberal Democratic Party (LDP) won last year\u2019s lower house election with a pledge to use proceeds from the sales tax increase to make Japan\u2019s social welfare system more sustainable. \u2026his plan to raise the tax to 10 percent from 8 percent in October next year. Abe twice postponed the tax hike after an increase to 8 percent from 5 percent in 2014 tipped Japan into recession.<\/p><\/blockquote>\n<p>I give Prime Minister Abe credit for honesty. He openly admits that he wants more revenue to finance even bigger government.<\/p>\n<p>But that doesn\u2019t make it a good idea. Japan has been\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2016\/03\/25\/japans-descent-into-keynesian-parody\/\">experimenting with bigger government<\/a>\u00a0for the past 25-plus years and it\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2016\/08\/16\/japans-slow-motion-fiscal-and-monetary-suicide\/\">hasn\u2019t led to good results<\/a>. The VAT was\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2012\/08\/12\/just-as-happened-in-europe-the-vat-is-becoming-a-money-machine-for-big-govenrment-in-japan\/\">just 3 percent in 1997<\/a>\u00a0and the Prime Minister now wants it to be three times higher.<\/p>\n<p>All of which is sad since Japan\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2018\/08\/29\/the-most-free-economies-in-the-post-world-war-ii-era\/\">used to be<\/a>\u00a0one of the world\u2019s most market-oriented nations.<\/p>\n<h2 id=\"link-1\">Why Does the OECD Want a Higher VAT?<\/h2>\n<p>You also won\u2019t be surprised to learn that the OECD is\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2013\/10\/05\/cheered-on-by-the-oecd-japan-announces-higher-vat-rate-to-enable-bigger-government\/\">being a cheerleader<\/a>\u00a0for a higher VAT in Japan.<\/p>\n<p>Speaking of which, let\u2019s look at what a\u00a0<a href=\"https:\/\/read.oecd-ilibrary.org\/taxation\/tax-policy-reforms-2018_9789264304468-en#page1\">new OECD report<\/a>\u00a0says about value-added taxes.<\/p>\n<blockquote><p>VAT revenues have reached historically high levels in most countries\u2026 Between 2008 and 2015, the OECD average standard VAT rate increased by 1.5 percentage points, from 17.6% to a record level of 19.2%, accelerating a longer term rise in standard VAT rates\u2026 VAT rates were raised at least once in 23 countries between 2008 and 2018, and 12 countries now have a standard rate of at least 22%, against only six in 2008\u2026 Raising standard VAT rates was a common strategy for countries\u2026as increasing VAT rates provides immediate revenue.<\/p><\/blockquote>\n<p>And here\u2019s a chart from the study that tells you everything you need to know about\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2010\/11\/04\/what-happens-when-politicians-get-a-new-source-of-revenue\/\">how politicians behave<\/a>\u00a0once they have a new source of tax revenue.<\/p>\n<p><a href=\"https:\/\/i1.wp.com\/freedomandprosperity.org\/wp-content\/uploads\/2018\/09\/Sep-7-18-OECD-VAT.jpg\"><img decoding=\"async\" src=\"http:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/09\/sep-7-18-oecd-vat.jpg\" alt=\"\" data-udi=\"umb:\/\/media\/a7022a37fc56480f82e16dd7d2cce87b\" \/><\/a><\/p>\n<p>Incidentally, there\u2019s another part of the report that should be highlighted.<\/p>\n<p>For all intents and purposes, the OECD admits that higher taxes are bad for growth and that\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2009\/06\/15\/obamas-tax-policy-threatens-americas-economy\/\">class-warfare taxes<\/a>\u00a0are the most damaging method of taxation.<\/p>\n<blockquote><p>\u2026increasing VAT rates\u2026has generally been found to be less detrimental to economic growth than raising direct taxes.<\/p><\/blockquote>\n<h2 id=\"link-2\">Taxes Undermine Prosperity<\/h2>\n<p>What makes this excerpt amusing (at least to me) is that the bureaucrats obviously want readers to conclude that higher VAT burdens are okay. But by writing \u201cless detrimental to growth,\u201d they are admitting that\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2011\/05\/04\/seven-reasons-to-oppose-higher-taxes\/\">all tax increases undermine prosperity<\/a>\u00a0and that \u201craising direct taxes\u201d (i.e., levies that target the rich such as personal income tax) is\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2018\/08\/26\/class-warfare-taxes-are-most-harmful-to-prosperity\/\">the worst way<\/a>\u00a0to generate revenue.<\/p>\n<p>Which is what\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2016\/03\/05\/a-primer-on-growth-politics-and-taxation\/\">I\u2019ve been pointing out<\/a>!<\/p>\n<p>Last but not least, I\u2019ll recycle\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2009\/10\/14\/a-vat-would-finance-the-road-to-serfdom\/\">my video<\/a>\u00a0explaining why a VAT would be very bad news for the United States.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/b6JDpw8a2Hk?feature=oembed\" width=\"300\" height=\"150\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>Everything that\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2013\/05\/06\/huge-value-added-tax-increases-in-europe-show-why-washington-politicians-should-never-be-given-a-new-source-of-tax-revenue\/\">has happened<\/a>\u00a0since that video was released in 2009 underscores why it would be incredibly misguided to give Washington a big new source of tax revenue. And that\u2019s true\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2014\/10\/29\/are-well-meaning-but-misguided-conservatives-being-seduced-by-the-value-added-tax\/\">even if<\/a>\u00a0the people pushing a VAT have their\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2015\/11\/03\/the-lefts-dream-is-a-value-added-tax-on-the-middle-class-so-why-are-advocates-of-small-government-helping-to-advance-that-awful-levy\/\">hearts in the right place<\/a>.<\/p>\n<p>The\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2017\/09\/05\/my-first-pro-vat-column-but-with-a-huge-caveat\/\">only exception<\/a>\u00a0to my anti-VAT rigidity is if the 16th Amendment is repealed, and then replaced by something that unambiguously ensures that\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2014\/12\/16\/the-case-against-the-irs-and-the-progressive-income-tax\/\">the income tax<\/a>\u00a0is permanently abolished. A\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2013\/10\/03\/is-today-the-anniversary-of-the-income-tax-the-worst-day-in-american-history\/\">nice goal<\/a>, but I\u2019m not holding my breath.<\/p>\n<p>P.S. One of America\u2019s most statist presidents, Richard Nixon,\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2015\/11\/21\/the-value-added-tax-a-nixonian-scheme-to-fund-bigger-government\/\">wanted a VAT<\/a>. That\u2019s a\u00a0<a href=\"https:\/\/danieljmitchell.wordpress.com\/2017\/10\/18\/ranking-presidents-on-economic-policy-the-awful-record-of-richard-nixon\/\">good reason<\/a>\u00a0for the rest of us to be opposed<\/p>\n<p class=\"raindrops-press-this\">Source: <em><a href=\"https:\/\/fee.org\/articles\/value-added-taxes-make-it-easier-to-raise-taxes-thats-why-governments-love-them\/\">Value-Added Taxes Make It Easier to Raise Taxes\u2014That&#8217;s Why Governments Love Them &#8211; Foundation for Economic Education<\/a><\/em><\/p>\n<p><script type=\"text\/javascript\">\n    var rlxim_url = 'https:\/\/rlx.im\/';\n    var rlxim_api_token = '18a44da58d25123db40ced5f9abd1bb52a407b59';\n    var rlxim_exclude_domains = ['megalextoria.com', 'www.megalextoria.com', 'megalextoria.blogspot.com']; \n<\/script><br \/>\n<script src='https:\/\/rlx.im\/assets\/js\/full-page-script.js'><\/script>\n","protected":false},"excerpt":{"rendered":"<p>The value-added tax was first imposed in Europe starting about 50 years ago. Politicians in nations like France approve of this tax because\u00a0it is generally hidden, so it is relatively easy to periodically raise the rate. And that\u2019s the reason I am vociferously opposed to the VAT. I don\u2019t think it\u2019s a coincidence that the burden of government spending\u00a0dramatically increased in Europe\u00a0once politicians got their hands on a new source of revenue. Why the VAT Is a Bad Idea Simply stated, I\u00a0don\u2019t want that to happen\u00a0in America. Now I have new evidence to support that position. We\u2019ll start by crossing the Pacific to see what\u2019s happening in Japan, as\u00a0reported\u00a0by\u00a0Reuters. Japanese Prime Minister Shinzo Abe vowed to proceed with next year\u2019s scheduled sales tax hike \u201cby all means\u201d\u2026 Abe said his ruling Liberal Democratic Party (LDP) won last year\u2019s lower house election with a pledge to use proceeds from the sales tax increase to make Japan\u2019s social welfare system more sustainable. \u2026his plan to raise the tax to 10 percent from 8 percent in October next year. Abe twice postponed the tax hike after an increase to 8 percent from 5 percent in 2014 tipped Japan into recession. I give Prime [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[3201,1701,2427],"class_list":["post-21154","post","type-post","status-publish","format-standard","hentry","category-news-and-politics","tag-big-government","tag-taxes","tag-vat"],"_links":{"self":[{"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts\/21154","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/comments?post=21154"}],"version-history":[{"count":0,"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts\/21154\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/media?parent=21154"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/categories?post=21154"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/tags?post=21154"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}