The VAT is necessary
ERNEST F. HOLLINGS, former U. S. senator
2010 -- The big banks, the multi-nationals, and Wall Street are making
big profits from the off-shoring of production and jobs. This keeps the
market up, but the economy is going to pot. People are without jobs and
will stay jobless unless we can stop the hemorrhage of off-shoring.
Oliver Wendell Holmes observed: "Taxes are what we pay for civilized
." While it's difficult, every Mayor, every Governor,
each year pays for the government that the city or state provides. But
when those same Mayors or Governors get to Congress, they become economists
worrying about the economy. Taxes hurt the economy. Suddenly, everybody
is against taxes. Congress goes into this off-Broadway show of all talk,
no action -- cutting spending; closing loopholes; long-range plans to
lower the debt; and fail-safe provisions for later Congresses to pay for
government. As a result of this nonsense, at the end of this fiscal year
Congress will have added $5 trillion to the national debt in four years.
"People are frustrated
because there's all talk and no action on jobs and deficits. People
are frustrated because our competitive country is not competing
in globalization. To compete, to stop deficit spending, to create
jobs, a value added tax is necessary."
could easily eliminate deficit spending by cancelling the corporate income
tax and replacing it with a 5% VAT. The 2010 corporate tax brought in
$191.4 billion, whereas a 5% VAT brings in $583 billion. This actually
amounts to a cut in taxes with more revenue. Exemptions of $83 billion
for the low income leaves $300 billion to start paying down the debt.
Since the VAT is rebated, this promotes exports and frees up $1 trillion
in off-shore profits that Corporate America can repatriate to produce
and create jobs.
The VAT solution is not just a good idea, but absolutely necessary. The
problem is not just the off-shoring of production and jobs to China but
the loss of production and jobs to Europe. Using its 19% VAT, which is
rebated at export, Germany produces parts at high cost in Germany, ships
the parts to Charleston, S. C., at a cost of 3%, assembles the parts at
3% cost, and produces windmills in the United States 13% cheaper than
any U. S. production. The corporate income tax that is not rebated on
export makes it difficult to produce for a profit in the United States
and makes U. S. exports uncompetitive in globalization.
But front and center in the mind of every member of Congress is his or
her job -- not the country's jobs. This takes contributions. Twelve years
ago, in my race to be elected the seventh time to the United States Senate,
I had to raise $8.5 million. Eight and a half million dollars factors
out to $30 thousand a week, each week, every week, for six years. It's
not just raising money the year ahead of election, it's raising money
all six years. And Wall Street, the big banks, and the multi-nationals
are the predominant contributors. Substituting the corporate tax for a
VAT makes it profitable to produce in the United States, but the profit
is not as big as off-shore profits. Wall Street, the big banks and multi-nationals
are not concerned about the country's economy. All they care about is
more and bigger profits. Multi-nationals get a tax break for off-shoring
jobs. So Congress caters to the contributors. It continues the tax break
for off-shoring jobs; refuses to even discuss a VAT; introduces bills
"made in the U.S.A.," and engages in every fraud about creating
People are frustrated because there's all talk and no action on jobs and
deficits. People are frustrated because our competitive country is not
competing in globalization. To compete, to stop deficit spending, to create
jobs, a value added tax is necessary.
Hollings of South Carolina served 38 years in the United States Senate,
and for many years was Chairman of the Commerce, Space, Science &
Transportation Committee. He is the author of the recently published book,
Government Work (University of South Carolina Press, 2008).
Ernest F. Hollings. All rights reserved. Contact
us for republication permission.
Ernest F. Hollings served
the public for 56 years -- 38 years in the United States Senate and as South
Carolina's governor, lieutenant governor and a member of the S.C. House of
Today, Hollings continues
to be influential in public affairs and offers this Web site as a compendium
of current and past positions on public issues. Learn
more about Fritz Hollings.
Hollings receives French honor
France honored retired
U.S. Sen. Fritz Hollings on in 2013 by awarding him the Legion of Honor for
his World War II service. More.
commentary via The Huffington Post
Please visit Sen.
Hollings' section of The Huffington Post where you can get an RSS of his
columns, subscribe by email or use social media.
here to learn more about Hollings' impressive and distinguished record
of public service.
the new book
University of South Carolina Press in 2008 published Making
Government Work, a new book by Sen. Hollings. Learn