By Tom Quiner
If you are looking for a way to increase the size of Big Government, impose a Value Added Tax on business.
The VAT tax is the driving force behind Europe’s expansive government and onerous tax burden. Europe began implementing the VAT tax in the late 60s. Their tax burden has increased by about 50% since, while ours has remained relatively stable (until Obama).
I mention the VAT tax, because Ted Cruz wants to implement a 16% VAT on American business. Now in Cruz’s defense, he also wants to simplify the tax code with a low 10% flat rate income tax.
And I like the idea of a national “tithe.” It is very Biblical. But ten percent won’t fund our government, thus the new VAT tax idea.
As you can see in the video above, Ronald Reagan opposed the VAT tax concept (or a ‘business flat tax’ or a ‘business transfer tax’ as it is also called) for three reasons:
- It’s an invisible tax. Taxpayers don’t directly and immediately feel the pain of tax increases. That means it is easy to raise, and thus inevitably will rise when Democrats regain power.
- It creates incentives to explode the growth of already Big Government with a flood of “invisible” tax dollars, as you can see below.
- It makes local and state sales taxes spike with the increases in the cost of goods wrought by the VAT, producing unaffordable tax rates for consumption.
Even worse, the argument that a VAT tax helps keep income tax rates modest has not proven true in Europe, as you can see in the chart below. In the name of “distributional neutrality”, income tax rates have grown there despite the addition of massive VAT taxes.
Ted Cruz deserves credit for some good, conservative ideas, but his tax plan would be a disaster, leading to ultimate hikes in taxes, government spending, government debt, and a decline in our standard of living.
For this reason alone, I would not vote for him in the Iowa Caucus.