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America's Tax Crybabies

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For decades, Americans have preferred to run up huge deficits by borrowing from foreigners rather than living within their means by collecting enough taxes to cover their governments' expenditures.

Any attempts to raise taxes are greeted with derision by voters who have no idea how low their taxes are compared with the rest of the world.

Like others living outside the U.S., I'm very unsympathetic to this whining and deficit-riddled form of governance. It's ruinous for the rest of the world and has been a contributing factor to the economic mess we're all in nowadays.

Americans are tax crybabies, but their spendthrift party will have to end. For the first time, there's hushed whispers in Washington's policy corridors of a possible federal VAT, or GST, across the land to right the listing ship of state.

Some say this is impossible. After all, the President who does this must be the political equivalent of a suicide bomber, willing to die politically in order to get to fiscal heaven.

Breakthrough thinking finally

But no less than the great former Governor of the Federal Reserve and Reaganite, Paul Volcker, has given some, albeit tepid, support to the possibility, according to a recent Washington Post article.

To Canadians, and the rest of the free/developed world, an across-the-board sales tax is not only a no-brainer but, quite possibly, a world saver now. Europeans, pay roughly 15% in VAT taxes and most Canadians pay nearly the same in sales taxes to their provinces and the feds, Alberta excepted.

The Americans need to spend trillions over the next few years and can only do this through taxation, borrowing or printing. But more U.S. debt or currency debasement are dire for the world's economy and will lead to even greater problems down the road.

In a probably vain attempt, I will repeat once again some taxation statistics I published in January 2009. Figures were provided by investment banker and economist DeWolf Shaw of DeWolf Research in Montreal:

  1. Washington could raise US $600 billion per year or more if Americans paid a 5% federal sales tax on goods and services if it was identical to Canada's 5% GST.
  2. Another US $280 billion could be generated if Americans paid slightly more than double what they pay now, or US $3.75 a gallon for gasoline, which is roughly what Canadians pay.
  3. Another US $180 billion is available if Americans paid the same taxes on cigarettes as Canadians.
  4. Then there's another US $355 billion for government coffers if Americans had the same liquor taxes as Canadians.

The total which could be raised from all four of these is US $1.415 trillion. That is, by the way, the size of Canada's or Spain's economies.

That's more than enough money to fix the fiscal mess. For those who think such taxes are job-robbers, consider the economic benefits and jobs that derive from a public sector that provides health care, infrastructure jobs or better education.

Who likes taxes, but the Americans need more of them as much as they need oxygen. They also need to be more responsible in managing their affairs.