JULY 16, 2012 -- To create jobs and pay down the debt all the President and Congress need to do is eliminate the 35% Corporate Tax and replace it with a 6% Value Added Tax.
The "value added" is measured by the difference in the cost of parts and materials and the sale of the finished product - be it wholesale or retail. A 6% VAT would be 6% of the difference in the cost and sale price. The VAT is not complicated, regressive or a money machine. 150 countries compete in globalization with a VAT and not having a VAT is killing manufacturing in the United States. The VAT is rebated on exports. The Corporate Tax is not.
One can start a business, be making a profit, paying the 35% Corporate Tax on exports and paying the 17% VAT when his exports reach China. Soon he will be competing with tax free China imports that will put him out of business. The VAT has no loopholes so we have instant tax reform. The VAT is self-enforcing so we can cut the size of government (IRS). Eliminating the Corporate Tax releases $2 trillion in offshore profits for Corporate America to invest tax free to create jobs in the United States.
Corporate Tax produced $181.1 billion in revenues. A 6% VAT for 2011 would
have produced $728 billion in revenues. This VAT tax cut produces billions
to pay down the debt, creates millions of jobs and jumpstarts the economy.
But all we get from the pundits is "cut taxes", "cut regulations"
and "federal aid for policemen, firemen and teachers" that don't
build a strong economy.
the VAT tax cut to pundit friends Chris Matthews, Ed Schultz, Rachael
Maddow, Lawrence O'Donnell, Bill O'Reilly, John King and Joe Scarborough
-- but nothing. Perhaps the pundits keep the VAT tax cut "top secret"
because their programs depend on continued controversy.
Senator 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 Making Government Work (University of South Carolina Press, 2008).
© 2012, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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