Dean Baker On The Upcoming Assault On Social Security (Video) - FDL

Readers of firedoglake are aware of the upcoming assault on social security. The planned post-election votes on gutting the safety net and imposing a value added tax are not news to many of us. Having watched this video, I still find it stunning that this is what we are getting from a Democratic administration and a Democratic majority Congress. I really shouldn’t. A lot of the economies worst decision makers have served under Democrats or are indeed themselves Democrats. But what these people are planning to do to us next is on the level of what Bush did to us post-9/11. It’s more shock doctrine. I find it cruel. Dean Baker suggests voters ask their elected officials to both reaffirm their commitment to no social security cuts and to not imposing a value added tax before casting their votes this November. I plan to heed his advice.

Value added tax (VAT) is similar to a sales tax. It is a tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer. Maurice Lauré, Joint Director of the French Tax Authority, the Direction générale des impôts, was first to introduce VAT on April 10, 1954, although German industrialist Dr. Wilhelm von Siemens proposed the concept in 1918. Initially directed at large businesses, it was extended over time to include all business sectors. In France, it is the most important source of state finance, accounting for nearly 50% of state revenues.<1>

Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT (input tax) on the products and services that they buy in order to produce further goods or services that will be sold to yet another business in the supply chain or directly to a final consumer. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling. Critics point out that it disproportionately raises taxes on middle- and low-income homes.