Volcker On The VAT

Taxes are surely an important element of business.

It's well-known that the famed Bush tax cuts of 2001 expire at the end of this year. We have already seen new tax increases passed into law as part of the recent health care bill. For example, for the first time ever, investment income is now subject to FICA taxes.

It's a conceptual step of significance, since it breaks the original link between wages and social security contributions and payments.

Now, the current administration is widely signaling a move that makes the FICA-taxing of investment income look like a baby step.

I'm referring, of course, to the VAT tax.

Personally, I have great respect for Paul Volcker's opinions on monetary policy and, to some extent, his basic ideas of financial sector regulation. However, I don't recall his being Treasury Secretary. Nor his particular expertise on fiscal matters, such as tax policy.

In fact, Volcker has been a lifelong Democrat. And he consorts with the most explicitly socialist American administration in history.

Thus, it's disappointing, but not surprising, that Volcker announced last week that new taxes will be necessary and, what the heck, a VAT isn't as "toxic" anymore as it used to be.

Huh?

Volcker essentially admitted a VAT is toxic. But, according to Paul, if taxes are needed....because we can't possibly cut spending......well, maybe the time has finally come to succumb to the silent theft of the VAT.

Want to really put any US economic recovery on hold? Make a big push to raise prices on everything by 20%. Because tax incidence always moves to the consumer.

Too bad Volcker didn't stick to monetary affairs and declare himself unqualified on this matter.