Falling into the VAT, Part II
by Richard
The VAT (Value Added Tax), when it comes, will be an easy sell to a diminished and demoralized debtor nation desperate for solvency.
Like the income tax, or social security and medicare payroll taxes, it will first emerge as a mere sliver of its potential…hardly a blip on our consciousness.
As an exercise in nostalgia and masochism, you might Google the history of income and payroll taxes. You will be blown away at how innocuous and inconsequential the marginal rates were at the beginning.
But once the camel gets his nose in under the tent…
The playbook is long established and proven.
Every drug dealer knows the first few hits are free, if you want your customer to develop an addiction.
And still it won’t be enough.
The Laffer curve will assert itself no matter which party is in power, and as productivity and success are increasingly taxed at the margin, each incremental increase in taxation will result in a corresponding decrease in income.
The wealthy did not become wealthy by being stupid.
Many are owners of small businesses and professional practices directly under their control. It is both feasible and probable that salary income will decrease…somewhere below the demarcation line between the deserving working classes and the demonized, overpaid rich.
That line is now drawn at $250,000…but will be steadily defined down when the expected revenue haul falls far short of its target.
The focus will be on reinvesting income to grow privately owned businesses, to bulk up unrealized (hence, untaxed) capital gains.
That’s why static analysis never works. Smart people respond to both incentives and penalties with amazing alacrity and finesse.
And so will come the inevitable and ultimate tax of inflation.
When the supposed savings from health care “reform” never materialize, and when all other explicit forms of taxation serve only to drive economic activity underground and offshore, the government will have no recourse other than to devalue the dollar through inflation.
The ultimate in debt repudiation, short of going the full Argentina, and simply tearing up your outstanding bonded indebtedness.
In part III, we will discuss your survival options…flying under the radar of the tax and spend regime.
