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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch ✹✺🐝 SILVER
SHREWD
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Number: of 22351 
Subject: Re: "The Art of The Deal"
Date: 07/29/25 12:16 PM
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You can't be that naive. Not if you have spent any time as a US resident or citizen.
Within 2 to 4 years the federal government would increase spending by more than the amount of VAT collected.


I agree that US legislators are not always renowned for their long term prudence, and optimism on that front is not the obvious stance. But to be fair, the same is true of legislators around the world, give or take.

Consider:
Canada was a spendthrift in the 1980s, with venal politicos never looking beyond the next election, causing a debt and deficit trajectory that seemed soon to explode. But a 1991 7% national goods and services tax fixed it all pretty much single handedly (even though the revenue bump was not much at first, as it replaced a very 19th century style manufacturer's tax all of whose tax revenues disappeared at the same time). It is currently down to 5%. Have a look at the rankings of deficit-to-GDP and debt-to-GDP among the G7 these days.

So there is hope!

As for the notion that such a tax might become permanent and be increased, that's actually a good thing. Governments do need revenue: the US has spending that the population doesn't want to go away so, despite the grandstanding, cutting spending is never going to fix the deficit problem. And nobody has found a tax that raises so much revenue with so little distortion and pain to the economy and populace. The revenue from that can allow reduction in the deficit, but also reduction in the amount of taxation in areas that are much more harmful. Payroll taxes, for example, which work to minimize employment levels. Depending on whether you consider Hong Kong to be a country or not, the largest country without a national consumption tax is Qatar, with GDP at 0.7% that of the US.

Jim
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This community has written 21,861 posts about Berkshire Hathaway. The article-length ones it recommended most:
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Summary of 2Q 2026 · 55 recs · 2026
3Q Summary · 53 recs · 2024
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