WSJ: VAT has potential of raising an enormous amount of revenue?

Chicago Tuesday PM 4 May 2010

Editors, The Wall Street Journal

Gentlepeople:

The excellent Wall Street Journal Fred Barnes article of Tuesday, May 4 may have its most telling statement buried deep in its 15th paragraph, where the VAT is described as “... a hidden sales tax with the potential of raising an enormous amount of revenue.” But its enormity is severely limited by the fact that 2/3 of all federal income is already a hidden national sales tax called employer withholding.

In 2008, the federal government took in a total of $2.745 trillion, 62% of which was withheld from wages (most recent figures in 2010 Statistical Abstract of US, table #468, page 311.) So nearly 2/3 of all the actual dollars that came into the US general fund were from employer bank accounts, not employee's .

Employers pass all of this on to customers in higher prices, resulting in almost 2/3 of federal income already coming from an invisible national sales tax. This hoax has been going on since the Current Tax Payment Act of 1943, but because of a regularly expanding national economy, it's all but painless to voters.

There is a solution: Changing paragraph 3402 of USC Title 26 — 'Internal Revenue Code' Subtitle C 'Employment taxes' Chapter 24 'Collection Of Income Tax At Source On Wages'... from "every employer making payment of wages shall deduct and withhold upon such wages a tax..." to "every employer making payment of wages shall pay all of those wages to the employee...." The employer would still calculate the tax, replacing the reassuring (but thoroly misleading) note "you earned and your employer paid" with "here is how much the feds are expecting you personally to send in within 30 days"

Would this be inefficient? Certainly for an insatiable federal bureaucracy. But how 'hidden' will it look to voters writing a check on their personal bank accounts to the Federal Government every month for 20% of their take-home pay?

Arnold H Nelson