Carbon Tax, Value Added Tax, Sales Tax -- and Puerto Rico

“If Hillary wins and we take back the Senate, I believe many of our Republican friends will say, 'Well, OK, we have been starving the government for revenues, we need revenues.'”

Thus spake Chuck Schumer, “the soon-to-be Senate Democratic leader.” That's right, the bloated swine that is Washington, DC, has been "starving." But dearest Chuck has a solution: a carbon tax! I thought the purpose of that was to save the planet, but there is an even nobler goal: feeding a "starving" government. Thanks, Chuck, for letting the truth slip out.

Just one more tax and our political masters will be through. Rand Paul’s cure for the income tax is a 14.5% value-added tax. Oh, he doesn’t call it a VAT, it’s a “business-activity tax.” A VAT by any other name still smells as foul. Unlike a sales tax, VAT captures revenue for the government at every step along the supply chain as raw materials are turned into finished goods. Anyone who adds value to the product pays VAT on their profit minus the VAT paid by the preceding business. But what about me, the end consumer? I add no value to the product, yet I pay the full VAT on something whose price has necessarily risen due to the taxes paid by all the processors upstream from me. So “VAT” is a misnomer. It should be “VAT cum sales tax.” But that is unwieldy, and, more importantly, it would give the game away. Besides, we would still have sales taxes, because state and local governments mustn’t starve.

What about the poor? We can expect exemptions for food, clothing and an expanded Earned Income Credit, letting the burden fall more heavily on the middle class. Then the lobbyists would attack year after year to gain carve-outs for “good” sectors of the economy. Do I hear the green lobby demanding exemptions for solar panels and wind turbines?

Finally, there is the rate: If Paul’s proposal were followed, it would be “only” 14.5%. Until our masters determine the government is “starving,” when we could expect 15% … then 16% …  17% … The arc would follow that of sales taxes. When first begun they started out at 1 or 2 or 3%. Now the national average is 8.61%.

Oh, I almost forgot. What about a VAT and income tax? No, no, no, Paul’s VAT would replace the income tax. Sure it would. But the Europeans, who are so much more progressive than we, have both income tax and VAT. How long till we get to enjoy both too?

And here’s a well-kept secret: increasing sales taxes by over 50% in one fell swoop will cure decades of government mismanagement! Need proof? See Bloomberg’s “Puerto Rico Tax-Increase Plan Fuels Longest Debt Rally of 2015” with its breathlessly giddy tone. That was May 26, when the Puerto Rican legislature raised the commonwealth’s sales tax from 7% to 11.5% and converted it into a VAT. Looming default averted! Yay for the taxman! (Puerto Rico had 0% sales tax until 2006.)

That was little more than one month ago. What about the Puerto Rican debt crisis now? All cleared up? Not quite. The White House says no to a “federal bailout” but is open to Congress allowing some government entities to declare bankruptcy if only the obstructionist Republicans would act (“some” here would affect bonds totaling $25 billion out of Puerto Rico’s total debt of $72 billion). Sounds like a great idea. Nancy Pelosi is on board, and it won’t cost anyone anything -- except the bondholders, and those filthy capitalists don’t need their money anyway.

Meanwhile, there are 5 million Puerto Ricans on the mainland, and, to judge from those interviewed by the New York Times, they’ll vote for candidates who promise to “help” their island. They must be representative of all Puerto Ricans here, because the NYT would never cherry pick a nonrepresentative sample. Never.

Henry Percy is the nom de guerre of a writer in Arizona. He may be reached at saler.50d[at]gmail.com.