The Personal Opinion of Value on Value Added Tax

The debt clock has reached a staggering $11.9 trillion.

This is a staggering number! Keep in mind that our current GDP is approximately $13.3 trillion. That puts our debt at around 90% of our GDP. Even during the worst times in recent history of Reagonomics the debt was no more than around 65% of GDP. The current debt ratio is the highest it has even been outside of WWI and WWII time when the country was in a middle of a major war. Arguably the "war on terrorism" i guess could qualify as a major combat (Iraq and Afghanistan). But realistically Iraq and Afghanistan do not truly compare to our efforts during WWII.

So what does this debt mean and how do we get out of it. MY proposed answer is the national sales tax or value added tax - depending on how you implement it. Here are 3 basic reasons for implementing a value added tax:

1. It has the potential to progressively raise far more revenue than the income tax. A Washington Post article discusses some valid reasons along this line and how it may be progressive and raise revenues while keeping Obama's $200K tax promise.
2. It encourages a pro-environmental consumer by clamping down on rampant consumerism, reduce consumer debt by encouraging less spending on unnecessary goods, and generally trends the society to a more need based consumer than a want based one.
3. It has the potential to grab a significant amount of additional tax money from the illegal community. Currently most illegal immigrants work and pay no taxes. Combine that with cash earners and other "below the radar" cash based economics which do not pay any income taxes, the VAT captures those when the earners spend any money to buy goods. Conservatively if we say that there are 15 million illegals and that results in 5 million households, with each household spending around $10K in taxable goods. Then at a 10% VAT rate we can easily capture another $5 billion a year!

Now a national Sales Tax is not good all around, but for a detailed look at the pros and cons go to this website to read the benfits and drawbacks. I feel the benefits outweighs the drawbacks.

Write to your congressman about this idea. At the end of the day I believe whether we like it or not we HAVE to raise taxes and raise some additional revenue. I think the consequences of not doing anything for this national debt is worse than taxes.