VAT would help elite, hurt poor
To the editor:
I enjoyed Senator Hollings piece on “Understanding Washington” and I agree with many of his observations. I’m far less enthusiastic about his suggestion that we institute a VAT (value-added tax) — essentially a sales tax — as a substitute for a dramatic reduction in corporate taxes. As any economist will agree, VAT, or sales taxes, are extraordinarily regressive.
The Netherlands where I lived in 2009, like many European countries, had a high VAT — 21 percent. In countries where there is a high VAT, studies show that the poorest 20 percent of the population spends nearly 10 per cent of their income on VAT, while the wealthiest 20 percent, spend only 4 percent of their income on VAT. To some extent, this is mitigated by a much more expansive social safety network financed higher maximum income tax rates in the Netherlands and other advanced European countries — from 45 percent in Britain to 70 percent in Belgium.
The regressive consequences of Senator Hollings’ proposal are compounded by a reduction in corporate taxes. While nearly half of Americans directly or indirectly (through retirement funds, etc.) own stocks, the top 5 percent of taxpayers own nearly two-thirds of all corporate stocks while the top one tenth of 1 percent own nearly a quarter of all stocks. Obviously, a reduction in the corporate tax would benefit that elite while a dramatic increase in VAT would fall most heavily on the poor and the middle class.
Value-added taxes and a reduction in corporate tax rates do have some benefits, but unless we are willing to accompany such changes with a dramatic increase in income taxes and the earned income tax credit and an enhanced social network financed by far higher tax rates on the well-to-do, we will simply exacerbate the gross economic inequality in our nation, now the fourth highest in the developed world.
— Dan Carter, Columbia, S.C., and Pisgah Forest, N.C.
Column on dog was a keeper
To the editor:
This week’s column entitled “If you want a friend, get a dog” was charming especially to all of us who receive such devoted love from our dog (and cat) pets. Thanks for this “keeper” although actually we are often enjoying your columns in general.
— Sheila Haney, Hartsville, S.C.
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