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Value-Added Tax Added to 2012 Republican Platform

Published: September 2, 2012
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Source: Barrons

The 2012 Republican Platform calls for a complete overhaul of the federal tax system. No surprise there. But then it endorses a value-added tax or national sales tax as one possible solution to the nation's budget problems. This is shocking.

The VAT would be adopted only if it is accompanied by "the simultaneous repeal of the Sixteenth Amendment, which established the federal income tax," the platform states. A Republican-controlled Congress passed that amendment in 1909, and the states ratified it in 1913. The tax was aimed squarely at the ultra-wealthy, targeting the top 1% of wage earners.Removal of the 99-year-old tax amendment is so unlikely that the platform plank seems facetious. As for the VAT, perhaps it was inserted in the document for yucks, too. A mere two years ago, "VAT" was an obscenity in GOP circles. The Republican National Committee, which produced the 2012 platform in 2010, vigorously attacked the value-added tax after Obama advisor Paul Volcker said that a VAT or a carbon tax might be needed to narrow the budget deficit. The RNC assumed that the Democrats would add the regressive VAT to existing taxes and consequently soak the middle class.

Arizona Republican Sen. John McCain introduced a rancorous resolution in April 2010 that condemned the proposed tax as one that would cripple families on fixed incomes and "further push back America's economic recovery." MostSenate Democrats -- worried about the coming 2010 midterm election -- sided with McCain. Only 13 senators voted against the resolution.

WHAT IS A VAT? It's a sales tax, used mainly by the Europeans, that layers taxes on a product at each stage of manufacture and distribution, from raw materialto final sale. The nonpartisan Tax Foundation offers this example: "Take a wooden table sold at retail and a 10% VAT rate. The lumber company sells the wood to the furniture maker for $50, paying $5 (10% of $50) to the government. The furniture maker sells the table to the retailer for $120, sending $7 ($120 - $50 = $70 X 10% = $7) to the government. The retailer sells the finished table to a customer for $150, sending $3 to the government ($150 - $120 = $30 X 10% = $3). The total tax paid is $15, or 10% of the final retail price."

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