Streetwise Professor

July 22, 2010

A VAT Trojan Horse?

Filed under: Economics,Politics — The Professor @ 4:38 pm

This story is creating something of a stir (h/t R): gold dealers are up in arms over a provision buried in the thousands of pages of mind numbing verbiage of the health care law.  The provision requires firms to submit a 1099 for “purchases of all goods and services by small businesses and self-employed people that exceed $600 during a calendar year.”  Gold dealers are peeved because with gold at $1000+ an ounce, virtually every purchase and sale they do will require submission of a 1099.

The ostensible purpose of this provision is to permit the IRS to capture billions of dollars of taxes on transactions that currently go unreported.  That was necessary to make the health care bill pay for itself.  Or, I should say, it was necessary to make pretend that the health care bill pays for itself.  Any sentient being knows that it can’t, won’t, and never will, blizzards of 1099s or no.

But there is something more worrisome about this provision.  Virtually exhaustive documentation of transactions is necessary to make a value added tax work.  I suspect, therefore, that the true motive–or at least, a collateral benefit, in the eyes of our tax junkies in Washington–of this provision is to lay the administrative and operational foundation for the adoption of a VAT.  Just saying.

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1 Comment »

  1. Craig,
    I have to start by clarifying that I am a staunch conservative. But that said the idea of a vat isn’t particularly repugnant to me. During the election the WSJ ran a piece that claimed that by 2015 or so a majority of voters would not be paying any taxes. Under both candidates’ tax plans. This is suicide for obvious reasons. Unless every citizen (with reasonable exceptions) is financially invested in this country, they will do what economic animals do – sponge off the rich. Until the rich will have it no more. A vat with a scaled back income tax that progressively taxes the rich would bring us all into economic alignment, and if charged at the register it would be as easy to administer as the sales tax.

    Comment by Davis — July 23, 2010 @ 7:37 am

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