Free Markets, Free People

Paul Volker


Laying the groundwork for new taxes

There is no one out there that won’t agree that government has gotten us into a debt-ridden fiscal mess.  Note I said government, meaning both Republicans and Democrats.  And now, on a spending binge from hell, we’re starting to see how this particular administration plans to address the growing concern over the debt.  Given some choices  -cut spending, cut the size and cost of government or increase taxes – it appears it will choose the taxation route.  And Paul Volker is just one of many who will be making the case.  Reuters reports:

The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.

Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax “was not as toxic an idea” as it has been in the past and also said a carbon or other energy-related tax may become necessary.

Though he acknowledged that both were still unpopular ideas, he said getting entitlement costs and the U.S. budget deficit under control may require such moves. “If at the end of the day we need to raise taxes, we should raise taxes,” he said.

Should we?  Or should we approach it from a different direction – such as the first two choices.  But the expansion of government is an ideological choice of the party in power.  Don’t believe it, check out this article about hiring.  The government is seeking to add 193,000 new jobs in the next two years.  So, uh, it’s up to you to pay off the deficit and get those entitlement costs under control.  And, of course, notice that Volker points to both a VAT and a tax like cap-and-trade as “necessary”.  Note too that neither tax is a direct income tax although both would directly and expensively impact income of all consumers by making virtually everything cost more.  However, the charade of “95% of you won’t see your taxes go up by a dime” will be maintained.

What voters need to do this November is make the Congressional races about the difference between the choices I’ve laid out.  And, unlike Volker’s conjecture, we need to make the VAT and cap-and-trade as electorally toxic as possible to those that support them while rewarding those who take the alternative approach.  There is no reason that increasing taxes should or must be the only solution to the unchecked profligacy of government.  Perhaps, instead, it is time to limit government’s ability to spend us into oblivion and put the people in office who can start that process rolling.

~McQ