Thursday, September 17, 2009

Joe Six Pack Meet VAT

Until now, the United States has been VAT free. With the signing of socialized medicine we will undoubtedly see the implementation of a VAT or value added tax. I would venture to guess it starts at about 15% and creeps upwards as the program falls further and further into the red. Sweden, where I currently reside, has a VAT tax of 25% on most goods and services. Yes, you read that correctly. 25%.

The VAT tax, basically a sales tax, is a consumption tax. It will be levied on top of your federal and state income taxes, your state sales tax and whatever other taxes you are subject to. It isn't getting much talk in the media leading me to believe Joe Six Pack does not even have it on his radar screen. I don't think he knows it is coming.

Understanding the numbers is paramount to understanding the need for a VAT tax. According to approximately 2% of Americans will make over $250,000 this year. Though the Democrats are operating by giving the assumption that taxpayer funded healthcare will be afforded by taxing this segment of the population, it is painfully obvious that there are not enough "rich" out there to pay for this massive entitlement.

What this is, essentially, is a back door middle class and lower class tax increase and a big one. It is a job killer, a consumption killer and an economy dragger. It increases the price of goods at each stage of production and it ushers in consumer prices far more than simply increasing them the simple percentage of the tax. Here in Sweden, it is not uncommon to pay 2, 3 or more times the prices in the U.S. for common everyday goods.

The result? You think twice before buying anything. Personally, I am waiting for trips back to the US to get much needed items. Jeans, a new iPod, etc. Many Swedes have told me how they "stock up" on items like jeans, foods, liquor when traveling. Not to mention, the black market that begins to flourish in high taxation environments. All opportunity costs that can not be weighed in when figuring statistics and studies.

Fortunately, the taxes come before the benefit with this healthcare scheme. Taxes will begin immediately and the "benefit" does not come until 2013. I am only hoping that the American people will not stand for the Europification of their country and the backlash will be staggering.

1 comment:

  1. fantastic job of laying it out. I have seen this coming since about day 30 of this administration. It is enevitable with the programs they are discussing. The middle class is collapsing. A few congresspeople have even said as much. The thing is, I believe, this is what they WANT. Two class society. And they are in the top, along with Hollywood and the uber rich and the rest will be in the bottom.