Corporations do not pay taxes, they collect them, passing the burden to consumers as a cost of production. And corporate taxation is a feast of rent-seeking -- a cornucopia of credits, exemptions and other subsidies conferred by the political class on favored, and grateful, corporations. Because the income tax is not broadly based, it radiates moral hazard: Its incentives are for perverse behavior. The top 1 percent of earners provide 40 percent of that tax's receipts; the top 5 percent provide 61 percent; the bottom 50 percent provide 3 percent. So the tax makes a substantial majority complacent about government's growth.
Increasingly, the income tax is codified envy. A VAT is the political class' recourse when the resources of the minority that is targeted by the envious are insufficient to finance ravenous government.
Because a VAT would shred Barack Obama's promise not to increase any tax on households with incomes less than $250,000, he must hope the deficit reduction commission he created will provide cover for his apostasy. But 14 of the commission's 18 members must endorse any recommendation. Good luck finding two votes for a VAT among the six Republican members -- Sens. Judd Gregg, Tom Coburn and Michael Crapo, and Reps. Paul Ryan, Dave Camp and Jeb Hensarling.
And wait until the political class' most imperious masters, the elderly, are heard from. When they worked they paid taxes on their incomes; retired, they will resent -- they are virtuosos of resentment -- being taxed when they spend their savings.
Because a VAT potentially taxes everything, it would be riddled with exemptions. This is because it maximizes the political class' opportunities for showing favoritism -- by, for example, exempting certain "green" goods. It also widens that class' scope for the pleasure of being bossy. For example, it could reduce a VAT's regressiveness -- like rain, a VAT falls equally on the rich and the poor, but the poor devote a larger portion of their income to consumption -- by exempting most foods but not those that the nanny state disapproves: "Put down that sugary soda and step away from the vending machine!"
Money is time made tangible -- the time invested in the earning of it. Taxation is the confiscation of the earner's time. Although some taxation is necessary, all taxation diminishes freedom. Adding a VAT without subtracting the income tax would constrict Americans' freedom much more than the health care legislation does. Because the 16th Amendment will not be repealed, adoption of a VAT would proclaim the impossibility of serious spending reductions, and hence would be the obituary for the Founders' vision of limited government.
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