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Spend It Now! A Huge New Tax Is Coming...

By Dr. Steve Sjuggerud
Friday, April 9, 2010

Everything you buy is about to become 20% more expensive...
I'm not kidding. The latest idea out of Washington is to pay for its insatiable appetite for spending with what's called a "Value-Added Tax."
It's like a huge new national sales tax, on everything. In simple terms, the difference is that with a sales tax, the consumer pays it. With a "VAT," the manufacturer pays it. The consumer won't see it in the price on the shelf or on their receipt.
Politicians love this tax because it's a stealth tax... You can't see it when you buy something, but they still get their money. And unless you make your voice known, chances are excellent we'll eventually have a Value-Added Tax here.
The thing is, making things 20% more expensive here and giving that money to politicians won't save America. It'll make us less competitive. For Exhibit A, consider the state of European governments right now...
Greece, for example, has a VAT of 21%. Its government is bankrupt. The Value-Added Tax didn't save Greece.
Italy and Portugal have a VAT of 20%, and they're only a little less bankrupt than Greece.
Astoundingly to me, the Value-Added Tax in France has now crept up to a full 50% of France's government revenues. So how are things going in France with a Value-Added Tax?
France is unable to compete in the world. Unemployment is terminally high. The unemployment rate is now 10% in France. In 2005, the unemployment rate was 10%. And back in 2000, unemployment stood at 11%. Like I said, it's terminal...
Clearly, the system is not working. So why is the U.S. government in such a hurry to adopt it?
The Wall Street Journal explained it yesterday: "Taxes on the rich can't begin to finance the levels of new spending that the current government has unleashed... "
And foreign governments have been less willing to buy our government bonds lately. So the government needs a new source of a lot of money.
At first, a Value-Added Tax will be offered up by politicians as a small tax – just a temporary fix to get us over the hump on our current budget woes. But we know how it will go... Like all taxes (and parasites), it will become permanent in our lives and it will steadily grow. Remember, the VAT in France is now 50% of government revenue.
All we can do right now is let our politicians know we're against more taxes... because we know down in our toes that governments spend every dollar that comes in... and then some.
Think about it this way: When your child has overspent on the credit card, you don't hand over a new card to spend on.
We don't want to give our politicians a new credit card to ring up charges. Reject their request for another massive credit card, in the form of a Value-Added Tax.
Oh, the other thing you can do is make all your big purchases soon, before a Value-Added Tax comes along and adds 10%-20% to the price of everything you buy...
This is serious stuff. Don't sit aside and just let it happen to you.
Good investing,

Further Reading:

See a shocking chart that shows you exactly how massive the government's recent "money printing" spree really is here: This Chart Is the Simplest, Best Reason to Own Gold.

Get Steve's advice on how U.S. politicians could help instead of hurt our chances at recovery here: What the Government Should Do to Save America.

And find our best idea for shielding your retirement nestegg from the inevitable tax increases here: The Best Way to Beat Higher Taxes.

Market Notes


Yesterday, gold hit a new all-time high... That is, if you're a European.
Longtime DailyWealth readers know we encourage folks to take a "world view" of the investment scene – to occasionally view assets in terms of other currencies... or in terms of gold. Stepping outside your own currency gives you a broader perspective on things.
The European perspective on paper money is ugly right now. As we predicted back in December, the value of the euro is plummeting. Many European governments have taken on ridiculous amounts of debt in the past decade, which will continue to shred the value of their "backed by nothing" paper money.
For a picture of this shredding, we present the past two years of the gold price, in euro terms. While gold has traded sideways against the dollar for the past few months, it is soaring against the weak euro... and just struck a new all-time high. The only thing that can stop the uptrend in gold is if Obama and his counterparts in Europe decide to commit to fiscal responsibility. What's that you say? Yes, we agree, gold is a one-way bet.

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