Soak the Rich, but Tax the Poor, too

Our financial situation needs additional resources, not just Mr. Monopoly’s

Submitted by chemoanon

The federal government’s financial situation is alarming more people as debt grows. Not just the debt, but the dreaded feedback loop - an increasing share of revenues devoted to paying mere interest. Interest rates remaining high for the modern era makes this all worse optics. Biden’s regime released a potential tax plan, and it collects more revenue via normal means. There is another path. It involves expanding the tax base, but the left calls it villainous. Do you have the courage to tax the poor?

In an era of growing fiscal challenges, policymakers may seek innovative solutions to ensure sustainable revenue streams. We also want to encourage people to earn more and possibly slow down the American addiction to mindless spending. One option that deserves consideration is the implementation of a two-tiered Value-Added Tax (VAT) system in the United States. This system would involve a lower VAT rate for essential goods and services, paired with a higher VAT rate targeting luxury items. Not only would this approach generate much-needed revenue, but it would also enhance the breadth of the tax system by broadening the tax base to include lower-income individuals who currently contribute little or nothing in income taxes.

A Value-Added Tax is a consumption tax levied on the value added to goods and services at each stage of production or distribution. Unlike what many call sales taxes, which are applied only at the final point of sale, a VAT captures value added at each step of the supply chain. By implementing a two-tiered VAT system, policymakers can tailor tax rates to different categories of goods and services. Making it tiered deflects from the idea that yes, our bottom quintile needs to cough up some money.

We can anticipate arguments and propose something “fair”. A lower or zero VAT rate would be applied to essential goods and services, such as groceries (maybe not processed food), healthcare, or basic utilities. This approach ensures that the tax burden remains manageable for low- and middle-income households, who spend a larger proportion of their income on necessities. This fights accusations of a “regressive tax”. By lightly touching non-discretionary items, the lower VAT rate mitigates the regressive nature of consumption taxes, where lower-income individuals bear a disproportionately higher burden relative to their income. Think of the poor crushed by inflation worse than the better off.

To help fight the assumed leftist narrative, a higher VAT rate would be imposed on luxury items, including flashy cars, jewelry, designer clothing, and other non-essential goods and services. By targeting luxury consumption, we can capture a greater share of revenue from those with higher disposable incomes. One advantage of a two-tiered VAT system is its ability to expand the tax base to include segments of the population that currently contribute little or nothing in income taxes. Lower-income individuals, particularly those earning below the tax threshold after deductions and credits, would still participate in financing public expenditures through consumption taxes. We only ask for all Americans to chip in, and for the record, all residents who may or may not be here legally. That’s only fair isn’t it?

We have a tax system that transfers significant portions of income from the few who pay taxes to those who are government consumers for lack of a better phrase. Critics of VAT whine about its potential impact on low-income households, who may face a higher effective tax rate on their consumption expenditures. Boo-hoo. We already have this mix of taxes at the state level. While progressive income taxes serve as an important tool for redistributing wealth and reducing income inequality (because we cannot escape those eternal goals in America), they create a disconnect between taxation and consumption patterns. The poor still benefit from government services and infrastructure funded by income taxes, yet they are not directly contributing to their financing. This has been the case for decades. It is a growing problem where the middle class pays taxes into a public sector that provides such awful services that the middle class ends up paying twice for the same product: once in taxation and again for the private version of the service that actually works. Schooling and now basic neighborhood security are two examples. This imbalance places a disproportionate burden on higher-income individuals who bear the brunt of financing public expenditures in an increasingly dysfunctional public sector.

More and higher taxes are coming. We have to anticipate where the left is going and make sure to spread the pain to even their client groups. The implementation of a two-tiered VAT system represents an opportunity to enhance revenue generation, promote tax fairness, and stave off some sort of debt default. Fairness should not just be the middle and rich being the only ones to ever pay. The left is going to find ways to target their opponents and already float trial balloons. They will tax inheritances, tax retirement accounts and find every way to take from those who produce and those who vote GOP. They are going to claw as much from you and your family in the name of privilege and equity, why can we not get $4 from every pair of Air Jordans? It is easy to propose tax policies on the rich, but do you have the courage to tax the poor?