Thursday, April 14, 2005

How Would You Like to Stop Paying Income Taxes?

Yesterday we commented on how incredibly unfair our tax code has become. The ideas of forced wealth-redistribution combined with tax breaks for the mega-rich have created a severe crush on the middle class. But there could be a solution.

The VAT. Regular readers of The Yellow Line know we’ve discussed this before (here and here…that’s right, nothing but the sexiest news at The Yellow Line). Now there’s this excellent article from the Jewish World View extolling the virtues of the VAT:

The income tax is rigged against ordinary people. Working stiffs have the income tax ripped every week out of their paychecks. Our Byzantine tax code lets rich people play with the numbers. Guided by daring accountants, business owners and investors can do creative things to lower their declared income and thus avoid paying income taxes. But they can't escape the VAT. When they buy their Learjet, Mercedes CL600 or Chanel suit, the VAT will catch 'em.

On the other hand, a VAT…taxes consumption only and doesn't penalize investments

The VAT would also force members of the underground economy to share the burden. We speak of criminals, nannies, illegal immigrants and others who get paid off-the-books — under the Internal Revenue Service's radar. The shadow economy is almost $1 trillion in size — or about 9 percent of the U.S. economy. If there were a VAT, underground workers would start paying taxes whenever they purchased a lawnmower, disposable diapers or a flat-screen TV.

A VAT is looking more and more appealing. It would need a lot of thought and a lot of safeguards, but any change that evens out the tax code would be a great improvement.


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