Bush tax package guts middle class

By WND Staff

Using tactics of deceit and distortion, President Bush will sign a tax bill that was literally dictated by him to Congress and passed by the Senate late last week while the writers were still crafting it. What is being put into action will not only completely gut our entire tax code but will add a level of taxation that heretofore was only known by the children of Israel when pharaoh commanded them to make bricks without straw.

The tax deductions have been sold to the American people as creating more jobs but the truth of the matter is that Congress feels you and I are not paying enough in taxes. What Bush has done, Clinton could not have ever gotten away with: a tax on everything we buy – otherwise known as a Value Added Tax – for you and me.

If you think you pay a lot in tax now, just wait and see what the Republicans – or should I say, “neocons” have in store for us. Let me give you a glimpse.

First, a Value-Added Tax system is a more “purer” form of tax because it is structured like the morning dew – it will tax everything and every process . For example, currently you are not taxed on the activity (not the gain but the activity) of buying or selling a house. Under a VAT, we will be taxed. Currently you are not taxed for the professional services of our doctor and dentist – those services will have a tax.

The basic structure of a VAT is that it is essentially equivalent to a tax on wages and pure profits – in other words, it is a superior form of tax. In fact, it is a “vertical” tax – depending on how the VAT is structured, every phase of manufacturing and production will be taxed. Currently it is not taxed. For example, the farmer who grows sheep will pay a tax to buy the sheep, then, when he sells the sheered wool, the weaver who buys it from the farmer will pay a tax on that purchase. When the weaver who spins the wool into fabric sells it to a pants factory, the processed wool will be taxed. When the factory sells the pants to the department store, another tax will be levied. At each phase, while there may be some offset in the tax between the various stages of production, you will be taxed on the cost of the shirt which also includes the tax that was paid at each phase. Will the price of the shirt increase – absolutely! So will the cost of living.

According to the International Monetary Fund, the VAT is a more modern tax, providing the ability to tax each phase of production and also the turnover of goods and services, thus increasing the cost to live while providing a greater income stream to the government. A VAT is basically sustainable development at its finest. Government can’t continue spending unless it increases its income stream!

Now this brings me to another point – the need for government to increase their income. Do you remember John Maynard Keynes and his socialistic “Keynesian economics”? Essentially, back in 1933 when America went into a major depression, Franklin Roosevelt relied on the “innovative” thinking of Keynes who recommended deficit spending to create new jobs. Well, 70 years later, every level of government in the United States is broke.

Currently, the U.S. government is $7 trillion in debt. Democrats, who have opposed this bill from the beginning, project that under the weight of the huge tax reductions being given to the very wealthy, that by 2013 when it is fully phased in, our debt will rise to $12 trillion or $36,000 for every person in the United States. Basically the July tax rebates we are going to receive will help contribute to this figure. Nothing like paying one credit card with cash from another!

Furthermore, instead of you and I paying taxes and receiving a service, we now live in a time when our government is privatizing (selling its assets to reduce its debt), changing the code so it can increase its income while reducing services to you and me. Under the current tax system, mortgage interest and charitable contributions are deductible. These will have to be sacrificed to provide the government with a greater and constant income stream. Simply put, a “pure tax” is basically “squeezing” the turnip – which is you and me.

So how does a government with a VAT increase revenue? In order to switch to a VAT from our current system of taxing income, the tax brackets of the rich will be reduced from 38.5 percent gradually over a 10-year period to the targeted 21-27 percent VAT rate. This level of taxation is the level that will produce the same amount of tax under our current system. At the same time, the tax brackets of those who have an income of $1 million and above is being reduced, those who currently don’t pay tax because they have too little income will have be subjected to an increasing tax bracket which may start out at 10 percent but will have to rise to meet the brackets of the extremely wealthy at 21-27 percent. Is your back breaking yet?

So – what if, in this time of never-ending war on terrorism, the government still does not have enough income? Well, then the rate can be increased. For example, in 1973 when England introduced the VAT, it started at 10 percent … today it is up to 18.5 percent.

Lastly, the president and his cabinet are unwilling to even admit that they are gutting the current system and putting a VAT in place that will benefit those like Warren Buffet who calculated that he will save $300 million while his secretary’s tax rate will increase. This tax bill should be more accurately called, “The Gutting of the Middle Class.”


Joan Veon is a certified financial planner and is president of Veon Financial Services, Inc., an investment advisory firm. Visit her website, WomensGroup.org.