The Congressman Misunderstands

What he misunderstands, though is a very expensive thing to misunderstand: basic economics.  Congressman Joe Crowley (D, NY), Vice Chairman of the House Democratic Caucus and member of the House Ways and Means Committee said in an interview with PJMedia‘s Nicholas Ballasy that he’s willing to “experiment” with a VAT in the US, “what effect that will have.”  And

PJM: … A traditional VAT tax that works in other countries or that other countries have, at least, do you think that could work in the United States?
CROWLEY: Well, it’s been something that we haven’t necessarily gone to in terms of—sales tax, for instance, is typically a states’ issue, you know, states have used that nominally in terms of tax purposes in terms of the impact. A VAT would be usurping that, taking for the federal government as opposed to state, and I think we’re open to talking about that and seeing what effect that will have because I do think that bringing our overall [corporate tax] rate down does make us more competitive, a more attractive place.  …   So I don’t think we have to go to 12% or to 20% per se; getting that right down is what we’re attempting to do and doing it in a way which is the least invasive or hurtful to the average working man in this country.

First, there’s a hint there: that “States’ issue” bit.  Other countries that use a VAT (which taxes an item sold at every stage of its production—at every stage at which value—as defined by the taxing government—is added to the product in production—so that by the time the end user buys the item is paying mostly tax value and not product value) are not federal republics like the US is, where the States in the federation are on an equal plain, at least nominally, with the central government in most national domestic areas, like taxing.

Second, it does no good to an economy to lower tax rates in just one area while other tax rates are increased in other areas (vis., the imposition of a VAT) to make up for it.  Total, overall taxes must be lowered, all tax rates must be reduced.  It’s the increased retention of money in the hands of citizens who work and who own businesses—shareholders—that spur economies, not the transfer of that revenue to government for spending.

Third, it’s not at all least evasive or unhurtful to force the average working man to pay a VAT-inflated price for everything he wants to buy or must buy.

Then this tidbit:

PJM: We’ll see. It’s going to be a quite a debate.
CROWLEY: It will be. There is a reason why neither healthcare nor tax reform was suggested by Democrats after the election as things we could work on right away—it was infrastructure. We did that for a reason—for some reason, that seems to have been lost on everyone.

Yewbetcha.  The Progressive-Democratic Party standard plan: get spending locked in first, then see about taxing to pay for it.

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