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Value Added Tax....Is The American Dream Over?

Updated on July 23, 2015

V.A.T. Prepare Yourselves For This One

It has taken awhile, from the perspective of most of the western world, but America is finally heading down the "Value Added Tax" highway. Your government is floating the trial balloons and gauging the reaction but make no mistake they are committed and , to invoke a popular clique,...." the die is cast"....With the debt levels soaring into uncharted territory and with the recession firmly in place major tax change is inevitable,regardless of which party is in power, a value added tax is coming

Over the coming year, especially AFTER the midterms in November, you will be buried under propaganda, from both sides, proclaiming the virtues or folly of a VAT system. Don't be fooled or mislead. Educate yourself research this topic so you are aware of what is going on and can make an informed decision. The politicians are not looking out for your best interest. they are looking out for theirs.

Financially the government is on life support and has only two viable options open to it. Either they drastically cut spending or raise taxes and if we are honest with ourselves we know they must do both. Since no government wants to champion a tax increase they will try very hard to confuse the situation and distort the truth. Be very wary.

Let's take a closer look at the examples of "VAT" around the world and maybe we can get a clearer picture of what is about to be dropped upon every American.... rich or poor.

The idea of taxing "value" goes back at least a century but it was not until 1954 when the Finance Minister of France introduced the first "VAT". Governments love it because they can tax ,not only, the items you buy everyday but a VAT allows the politicians to levy a tax on every service you receive as well. Deeming every service "taxable" would allow the "VAT" to be charged. Examples would be Doctor fees, Lawyer fees, Accountant's fees and every other service you can think off.

While VAT or Value Added Tax is the term used throughout most of the world it is, perhaps,, the Canadians that have the most honest and accurate description. In Canada this tax is called the Goods and Services tax which the Canadians call the GST...actually some refer to it as the GD GST. This is the clearest and most honest definition of the tax. It is basically a sales tax on all goods and services ...aka "VAT"

There are many who will argue that the VAT is not a sales tax but a "structured tax on "value" that is added at every step of the process from the manufacture to the delivery of the item to the consumer. Every time value is added the tax is charged and while the manufacturer, the supplier and the retailer will receive credit for the VAT they paid... you, the consumer, will pay the full amount ....getting the picture yet? Not a sales tax? You will pay this tax on everything you buy and every service you receive. Some have already stated that there will be no exemptions ....everything will be taxed. Others have said that food, drugs,and books might be exempt. Americans are in for a painful change and no matter what details are worked out this tax is exactly what it appears to be .....If it looks like a duck, walks like a duck and sounds like a duck......

The opponents of the VAT decry this government intrusion, into your wallet, as a regressive tax. They claim that the tax hurts the poor and middle class tax payers, more so than the rich, because the tax absorbs a higher percentage of their income. Those who favor this class of taxation claim that the VAT is not only a consumption tax it is also a proportional tax because, in their scenario, the rich buy much more than the poor and therefore pay more VAT. This tax is a consumption tax. It will impact every area of your life especially the poor and the middle class. Some countries have reduced income taxes or offered their most vulnerable citizens tax credits to help ease the burden. This tax is going to be tough on all Americans and you need to prepare yourself for what's coming.

There have been cases, in the world community, where the introduction of a VAT has had such adverse consequences that the losses in economic activity to the overall economy were greater that the income to the government. The introduction, of a VAT, not only made the situation worse it actually contributed to prolonging or worsening an inflationary cycle;. While it may be hard to believe that any politician would actually introduce a VAT in a recessionary cycle and do unnecessary harm to their countries economies it has happened several times.You might want to check out what happened in Canada, England, Norway, and a host of other countries and how the VAT was introduced in those countries. Politicians seldom consider the consequences of their actions especially if they believe "they know better"

One of the unexpected consequences of introducing a VAT, in many countries, was the explosion of the underground economy. All the service areas such as carpentry, home repairs, electrical plumbing, auto repairs ect began doing business in cash without receipts thereby avoiding the VAT. This took place in Canada ,and many other countries, and after nearly 20 years of the GST, in Canada, the underground economy is alive and well. The estimated loss, over that time, in GST revenues to the Canadian government is in the multiple billions of dollars. The people will find a way around a perceived regressive tax. The estimated value of the resultant underground economy in the US, from an imposed VAT, potentially could be in the hundreds of billions.

The "VAT" is now levied in almost 100 counties worldwide. The average rate in Europe is 20%. Canada charges 5% and Mexico 16%. Most of the South American countries levy a 20+% tax. Herein lies another problem facing the US. Using Canada as an example the 5% rate is a bit misleading. The individual Canadian provinces also charge provincial sales taxes which is on top of the GST. So the real level of Sales tax in Canada averages 15% not 5 and the US faces a similar situation. If your state charges sales taxes the new "VAT" will be on top of those. Like Canada many of the states will have a combined sales tax, depending on the level of the VAT, in the 15-20% range.

This may lead to a type of VAT system that will probably look very similar to Canada's GST rather than the European VAT. Like Canada the American government must deal with every state individually. They will want all states to harmonized their state sales tax to the new VAT tax and charge consumers one combined tax. It sounds good but the political and practical differences between the states and the federal government will, probably, make this agreement impossible. What, in the end, will happen is some states will agree to harmonize the tax and some states will not. This will, necessarily, lead to a system of confusing tax laws created to deal with a very confusing new tax system. Another issue that will not be well received is the method of collecting and submitting the tax. In Canada all businesses had to become de facto tax collectors for the federal government collecting the GST at the point of sale and submitting the revenue to the federal government. For those provinces that have not harmonized the taxes this means that those business have to collect submit, and process paperwork to two tax authorities. More expense in time and money for the already hammered business sector. The Canadian federal and provincial governments also could not agree so in Canada you have a patchwork of jurisdictions collecting the GST. Some provinces have harmonized the taxes while the rest have not. Alter 20 years the problems still remain.

Contrary to recent political pronouncements you cannot spend your way out of a recession with money you don't have. This leads to deficits, higher interest rates , higher debt levels which, when combined, will have the effect of shrinking not growing the economy. This approach produces what many economist refer to as a "jobless recovery". On paper the economy appears to be growing but no jobs are being created. A true sustainable recovery cannot occur without job creation. It is also a falsehood to believe you can tax your way to a balanced budget. For those who think so I would urge you to check out the condition of the 100 or so countries that have had a VAT in place for years. Every one of those countries are wallowing in debt, deficits, and high unemployment just like the US. Excessive taxation only hurts economic growth. How many times must that be proven out. Where are all the economists who should be speaking out about what this country needs and doesn't need. Everyone needs to speak up and speak out.......time is running short.

The vast majority of the economic activity in the US is driven by the consumer. Without a strong employment picture there can be no "recovery". It is time to focus on jobs and job creation. It is time to allow business to do what they do best. It is time for government to get out of the way and let the entrepreneurial spirit that still lives in this country lead us out of this self inflicted quagmire

It is time for the people to lead and the politicians to follow for the greatness of America cannot be found in it's governments, Democrat or Republican, the greatness of America.... is found in it's people. This is an historic moment in time for... America and for "We The People.......Stand up and be counted, Speak up and be heard or else the politicians, who already think of "We The People" as a petty annoyance at best and a bunch of rabble not worthy of their valuable time at worst will continue to destroy our economy and ,if we don't stop them,... our country


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    • point2make profile imageAUTHOR


      9 years ago

      Hi James, Thanks for reading my hub. Your comments are always welcome.

      You are absolutely right. The danger to America is growing and I fear for the future of her people. Freedom and Liberty are in danger of being redefined by a government that appears to be more inclined to impose "its" will on the people instead of being guided by the "the will of the people."

      They need to be watched very closely. The next step will be a "created" crisis that will enable the government to enact draconian measures they will claim are needed to "protect" the people.

      History always repeats itself for those who will not learn its' lesson. I pray we don't make the same mistakes.

      Socialism is finding favor among many levels of American society. It is quickly becoming fashionable, in some circles, to claim to be a socialist.Quotes of Mao, Marx or Engels are finding favor on our campuses. One very popular American magazine recently claimed, on it front cover, "We're All Socialists Now!.How incredibly sad it is to see Americans embracing a scourge that so many people, who lived in socialist countries throughtout the 20th century, tried so hard to escape from. Indeed many immigrants came to this country to escape socialism. What must they think now!

      There is a saying that goes something like....The fools are at the gate do we let them in........or out??

    • James A Watkins profile image

      James A Watkins 

      9 years ago from Chicago

      The Socialists now in power must create the ultimate crisis in order to achieve their aims—the elimination of Freedom and Liberty, the Great Leveling of all People. Thank you for an outstanding article. I love it!

    • point2make profile imageAUTHOR


      9 years ago

      Excellent response Jon!

      The problem the country faces is that the ruling party is committed to changing the very nature of America with or without the support of the people. They believe that the voters will come around, in time, and will ultimately support the changes. The dangers of this approach are many and it forces large scale change on a nation by a very small number of people. Those who adhere to social justice principles believe they are right and the citizens will just have to accept this change. Of course the problems begin to multiply when profound change, to a nation, is not supported by the citizens.

      The ruling party is attempting to reshape the very foundations this country was created on. Americans tend to notice when someone "fiddles" with the Constitution

      The government has taken upon itself so many important issues that their failure was predictable.

      The issues of Redistribution of wealth, Environmentalism, Union Activisism, Social Justice, Health Care, Cap and Trade, and Immigration.

      Any one of these issues, alone, would provide any new administration with a serious amount of work for a first term but this government is trying to tackle and "fix" these issues in the first 18 months. One has to ask yourself "why" why would any government try to tackle such important issues with such speed amid such growing opposition?

      The motives of our politicans are usually so transparent it borders on silliness. They lie to us and hope we won't find out. They make backroom deals and think the voters are too stupid to discover their larceny. Most of the time we put up with their foolishness because they are, for the most part, harmless and when they cause us enough displeasure we toss them out of office.

      Once in a while an issue or personality comes along and our cute little politicians forget who they work for and who holds the key to their future. They seem to transform into lemmings and launch themselves over the cliff while later claiming they were pressured or they thought they were doing the right thing. This appears to be where we are at in Washington.

      Jon...everyone needs to be aware of what is happening. They need to keep up on the issues, raise their voices strong and loud. Do not ease up for even one day. Keep the pressure on and in November....boot the lemmings out of office.

      The voters need to maintain a healthy scepticism when it comes to dealing with the "mainstream press". NO government would attempt to make the kind of changes that are being championed by this government without the complicit support of the main stream media. The People need to remember who supported them and who sold out to the politicans.

    • JON EWALL profile image

      JON EWALL 

      9 years ago from usa


      YOU REPORT :gas retailing around $6-$7 a gallon. For these people a plan of this nature would be a win/win. Not only would the massive increases in tax revenue benefit the treasury but it would also create, by the nature of high prices, less demand for petroleum


      In 2007 the Democrats( ENVIROMENTALS) took control of congress and immediately pressed forward to produce ethanol ( a corn product ), PROBLEM took corn production out of the food chain result higher food prices,

      Next curtailed US pumping of oil ,a barrel of oil was $45.00 in one year a barrel of oil reached $125.00

      PROBLEM gas prices reached $ 4.00 a gallon, trucking costs were passed onto the consumer ( you and the working public ),food prices skyrocketed due to shipping cost.

      The above was the cause of a major recession that economist say started in DEC 2007.

      Let's start with the middle class worker, how did the PROBLEMS above effect ones budget

      Going to work gas costs triple

      Food costs maybe increase 40%

      Mortgage payments starting of mortgage delinquencies

      Business costs rise need to layoff workers

      Business loans to operate non existent or curtailed

      Let's not forget rising costs of healthcare insurance

      The biggest joke is when a politician in Washington remarks that solar, wind and electric cars will wean the US off of dependence of foreign oil. It is a disgrace not to use Americas natural resources ( available right now if congress would release permits to produce our own gas and oil which will produce millions of jobs )

      The present congress and president Obama can't seem to produce any private sector jobs in 16 months to accommodate the 14.9 million people out of work. Just think, those laid off people aren't paying any taxes right now. Searching for work ,they won't be able to afford the gas to look for work. Guess what, maybe the great recession is in the future.

      President Lincoln once said '' to remain silent is to be a coward ''

      Anyone who wants the US to be like Europe, please pack your bags and go there. Only than you will realize that you live in the( present) greatest country on earth. It's all about our constitution and freedom that is under attack by people within our government.

      Wake up America and seek the whole truth and nothing but the truth. The TRUTH will set you free!

    • point2make profile imageAUTHOR


      9 years ago

      Thank-you for your comments doitrightnow.

      You are right a VAT will be a terrible regressive tax. Unfortunately the government is hooked on spending and taxes at this point in history so they will bring in a VAT sooner rather than later.I read and enjoyed your excellent hub on taxing churches. While it may appear to be unconstitutional to tax churches congress will, ultimately, find a way.

      There are those who believe that the congress can and will use the "commerce law" to breakdown the tax free status of churches. Most large church organizations, using television to further their ministeries, "sell" their books,dvd, cd's ect across the country and the world. Those who believe that churches should pay taxes point to this activity as "commerce" and, they believe, it should be taxed like any other business. If and when they bring down the large church organizations the small one will be brought down as well. The Constitution is under attack and the Congress along with the Supreme Court, whose members are sworn to uphold and defend the founding principles of this country are blinded by ideology and partisanship. They choose self over country and it is time for all Americans to take notice before it is to late.

    • doitrightnow profile image


      9 years ago from San Juan, PR

      A VAT is a terrible idea. I'm not one of these wild-eyed conspiracy theorists who cry that it will totally destroy the American economy. But as you said, the government is on life support. That's because of its toxic addiction to spending. Why feed the beast? Right at first, the VAT will be low and everyone will say, "See? Not so bad." Then the real crap will hit the fan. The beast will grow and tax more and more and more.

      By the way, a lot of people are suggesting that we tax churches instead of having the VAT. Here's a Hub about that:

    • point2make profile imageAUTHOR


      9 years ago

      Excellent point Wayne,

      You have the "answer" that many tax experts have been proposing for years.Many believe that now is the time for a flat tax. The flat tax is,according to leading economists, the fairest form of taxation and with the deficits and national debt out of control most Americans are looking for answers to solving this financial crisis. A flat tax coupled with strict spending limits, on the government, is seen, by many,as the best hope of restoring the fiscal health of the country.I am working on a hub that deals with the flat tax. I will post it in a few days. Hope you get a chance to read it. I would welcome your comments and opinion.

    • point2make profile imageAUTHOR


      9 years ago

      Thanks for the comments sheila b. they are appreciated. You are right the Government will try to appeal to your sense of duty. Then they will try scare tactics and finally they will simply pass the bill with or without your support. The VAT will do nothing to pay down the national debt as long as the deficit continues to climb into the "trillions" This year the deficit will surpass 1.5 trillion dollars and if they don't get the unemployment rate reduced, to normal levels, and if they don't stop spending NOW next years deficit could top 2 trillion. Any new taxes like the VAT will be eaten up by these kinds of shocking deficits.

    • Wayne Brown profile image

      Wayne Brown 

      9 years ago from Texas

      An absolutely fantastic approach to a very attractive subject that the USA looks to for splice...ain't gonna happen. I would hope that someone can give a practical view point on a flat tax approach! Great hub!

    • sheila b. profile image

      sheila b. 

      9 years ago

      They'll tell us they're going to pay down the debt with a VAT, but that's not their intention.

    • point2make profile imageAUTHOR


      9 years ago

      Thank you for your comments Jon. You make some very good points and I wish more people would begin to take notice at what is going on. It is obvious you are following this situation closely and keeping yourself informed. One thing I would comment on is the gas taxes. The government is not looking to just increasing gas taxes. In order to curtail consumption and increase revenue there are proponents, in the government, proposing that the US bring gasoline prices up to European levels. This would place a gallon of gas retailing around $6-$7 a gallon.For these people a plan of this nature would be a win/win. Not only would the massive increases in tax revenue benefit the treasury but it would also create, by the nature of high prices, less demand for petrolum products. Of course fewer people buying less gas and driving less would reduce the amount of carbon going into the atmosphere but that couldn't be their true motive for raising gasoline prices by several dollars a gallon....could it? These people will stop at nothing to make their agenda the law of the land. Whether it is good for America or not they are planning on making these decisions with or without the support of the American people . All Americans must remain involved and informed. There are forces, in play, that wish to fundamentally change this country into something most Americans would have trouble recognizing.

    • JON EWALL profile image

      JON EWALL 

      9 years ago from usa


      Enough is enough, gas is going up and the government wants to add a .15 tax to the .18 already in place. The last time gas went out of site was in 2007,the escalation helped the economy to go in the dumps. The politicians don't get it that the working class don't walk to work, trucking needs gas to deliver the goods. The last time many services were adding the cost to the invoices.

      The time now is for congress to cut their overhead at least 20%, take a pay cut,lay off the high priced union help and freeze all spending in all departments.

      Note this tibbet.

      The average pay in the private market is $50,000 plus $9,000 in benefits total $59,000

      The average pay in the federal/public market is $70,000 plus $40,000 in fringe benefits total $ 110,000

      Something is drastically wrong in the fringe benefits pay,it is time to make our elected officials correct the problem.

      It's time for the middle class to vote the bums out in Washington, cities, towns and states.

      OBAMA PROMISSED JOBS, the government has added many jobs ( unemployment in the public sector is 3% ).that's what he meant when Obama says he saved jobs. The private sector remains at 9.7%+, the only thing that has been done is to extend unemployment benefits to almost 2 years. In order to provide the benefits, the money borrowed impacts the deficits. Sixteen months and still no jobs even after the $826 billion.


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