Tuesday, January 5, 2010

Do not fall for a VAT (value added tax)



Do not fall for a VAT (value added tax). It is just as noxious as Cap n’ Trade. The thing that makes it appeal to the Demo/nihilists is its seeming simplicity and seeming low level of taxation. In reality it is complex enough to defy comprehension by the average man. And, just because low percentages are quoted (typically 5 or 6 percent) these are starting numbers that eventually are compounded in such a way that the real tax percentage is many times greater.

As if these drawbacks were not sufficiently bad, the most noxious part of the tax is it gives a license to government for massive intrusion. Every step in the production of a commercial good is subject to government audit.

Production starts with a shrimper in the Gulf of Mexico. He does not buy his catch, but he must pay wages, diesel fuel, insurance, his own wages, profit and other expenses in order to stay in business. His selling price must, at least, cover his expenses, including the VAT applied to his selling price.

Here is a small table comparing 0% VAT, 5% VAT, and 7% VAT as applied to the platter of shrimp Creole:

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