The Military-Industrial Complex for VAT

At a House Ways and Means hearing on Thursday, some business executives were even nodding to the possibility of a value-added tax to offset the budget impact of significantly lowering the U.S. corporate tax rate, reports WSJ.

Well, that's a surprise, rather than their being taxed directly, the Military-Industrial Complex would rather see the more broad-based VAT.

“As you take a holistic view… the value-added tax is one of those things that needs to be on the table,” Greg Hayes, CFO of United Technologies Corp., said in response to a lawmaker’s question, reports WSJ.

WSJ continues:

Many Democrats see a VAT as a way to pay for new infrastructure and shore up spending programs. Some Republicans – and corporate executives – see it as a way to pay for tax cuts that would spur investment, and make U.S. businesses more competitive. Much of the corporate-rate cutting that has gone on around the rest of the developed world in recent years has been paid for by increasing value-added taxes. Other countries view it as a necessary tradeoff to boost domestic manufacturing and exports.

The question for Congress, as Caterpillar CFO Edward Rapp noted, is “how much change can you take on at once.”

The only hope we have is "folk wisdom":

Folk wisdom among lawmakers holds that every elected government in the world that has imposed a VAT has been voted out at the next election.

Bottom line, watch what is going on here, the debate over the deficit is slowly being moved from a debate about reducing spending to a debate over increasing government revenues. Consider any talk about a valued-added-tax and/or "fundamental tax reform" as a move to hike taxes. The answer to anyone, who wants to have "fundamental tax reform," should be, "No, I don't want to change the structure of taxes, just start reducing them right from this structure."