The U.S. is drowning in debt. The right wing of the government promises no new taxes, while helping the left fund more programs. More and more of these programs are funded with foreign debt.  

According to economist Pat Choate's new book, Saving Capitalism: Keeping America Strong, when Ronald Reagan took office, the U.S debt was just under $1 trillion. Rather than tax to spend, the party decided to borrow to spend. In the last eight years, during the time George W. Bush was in office, we added $3.3 trillion to the national debt.  

According to Choate, Republicans that take office sign a pledge to keep taxes where they are. The idea is simple, bankrupt the government. The American people demanded FDR's New Deal. The public wants government programs like Social Security and Medicare/Medicaid. But if the nation is bankrupt, the government will be forced to limit itself, closing these programs, at least that is the conservative right's idea. 

The reality is that we need a better tax system. Choate lays that system out in simplistic detail. Rather than an income tax that over complicates and burdens us against our trading partners, Choate recommends a Value Added Tax (VAT), or consumption tax.  

A VAT would comply with our trading partners in the WTO. In fact, 153 countries are already using it to the detriment of the United States.

American Corporations pay income taxes here in the U.S. and VAT taxes when they export. Foreign companies do not pay U.S. taxes, and they get rebates from their governments for exporting. This creates a win/win for foreign competition and a lose/lose for U.S. manufacturers.  

Choate points out that Americans of all walks of life and from both sides of the political spectrum are against income tax. With a new millennium, the time has come for the U.S. to restructure its tax system. Choate talks about six points that should be factored into a new tax system. 

1.We need a tax system that will pay for America's spending.
2.The system should be broad enough to cover all economic spectrums, as “all Americans benefit from a strong and prosperous nation.”
3.The new system should focus on simplicity and transparency, less loopholes and simple forms.
4.The system should not favor any business type over another.
5.There should be transitional steps to the new system.
6.The system should be “trade compatible,” or in other words should not break any of our treaties.

 
While transitioning out of an income tax a VAT could benefit America in a number of ways. As we eased out of our current system, the extra taxes brought in from foreign companies could help reduce national debt and fund much needed new programs. The income tax could grow smaller each year as the VAT increases to offset government spending. With a GDP that is comprised of 80% consumption and a trade deficit over $1.5 trillion in the past 2 years alone, a VAT would bring in tens of billions of dollars from a new source – foreign importers - every year.  

As things stand the American population demands programs that our politicians are not making us pay for. The countries funding our lifestyle are running out of patience and we are reaching the limits of debt that we can borrow. We could keep printing dollars, but the more we make, the less they are worth. The only reasonable solution at this point is a complete overhaul of our tax structure.

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