Monday, March 29, 2010

STEYN: A healthy dose of catastrophe

Mark is in a bit of a rant here but makes a lot of sense. What about the imponderables he talks about? No matter what, the taxes on businesses will destroy our competitiveness on the world market, destroy our innovation and decimate our investments and financial security.

Can we afford this? No. Even on the official numbers, we're projected to add to the existing $8 trillion in debt another $12 trillion over the next decade. What could we do? Tax those big, bad corporations a bit more? Medtronic has just announced that the new Obamacare taxes on its products could force it to lay off 1,000 workers. What do those guys do? Well, they develop products such as the recently approved pacemaker that's safe for MRI scans and the InterStim bladder-control device. So that's 1,000 fewer people who'll be working on new stuff. Well, so what? The public won't miss what it never knew it had. So again, the effect is one of disincentivization - in this case, of innovation.

If existing tax structures can't cover the costs, what can we do? Start a new tax. The VATman cometh. VAT is Euro-speak for "value-added tax." Americans often carelessly assume it's merely a sales tax, but in fact, it's far more cumbersome than that, being levied at each stage at which "value" is added to a product or service. The consumer can't claim back the VAT, but intermediate businesses in the production chain can. So self-employed individuals with relatively modest income wind up both charging VAT to their clients (25 percent in Scandinavia) and then claiming back the VAT they spent on the stamp and stationary they used to mail out the invoice. This is yet another imposition on businesses, taking time away from wealth creation and reallocating it to government paperwork. If the Democrats hold Congress this fall, I would figure on VAT sooner rather than later.

All of the above is pretty much a safe bet. What about the imponderables?

Read Steyn's article here.

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