While reading an article on Yahoo, Inflation Jumps In Europe, a couple of point stood out.

First, indirect taxes could “dampen” spending. Taking away from individuals and companies means less money to spend.  Pretty easy concept to gather.

To continue, indirect taxes are hidden so-to-speak.  (You can find them if you look for them.  Hide and seek. ) Taxes such as these are applied to businesses through taxes and regulation, not to the actual product.  Then, the taxes are passed along in the form of higher prices because overhead (or the cost of doing business) is higher.  Consumers do not see the tax, but simply a higher priced product.  Sales tax, on the other hand, are highly visible.  Consumers see these taxes at the bottom of the receipt.  Either way, hidden or not, taxes cost people money.  As a result, more dollars are paid for the same goods – or inflation.

Next, the V.A.T. (value added tax) was raised 14% to a new level of 20% in Europe.  Therefore, prices rise.  This V.A.T. was seen as a good way to deal with the deficit.  A deficit means spending more money than coming in; therefore, would spending less deal with a spending problem?  (Coming to America – the VAT tax?)

Ultimately though, all taxes are inflationary.

With Obama’s enormous requests for spending and the Congress willing to oblige and write the checks, Volker feels we need a new tax to pay for the expenses.

Spending is at 25% of GDP and the new taxes will come from income taxes, a VAT (value added tax), energy tax, carbon tax or whatever. These taxes seem to be a “good idea”. Corporate taxes are already among the highest in the world. No wonder why companies move overseas.

Speaking of oversea, I have a relative who lives in Sweden and when they came to America, I was told he and his wife are required to put their kids in daycare at the age of three. The income taxes are 50%; therefore, both spouses have to work. I don’t know about you, but I enjoyed playing with the kids when they were three versus letting someone else raise them.

But back to needing a new tax; in my opinion, cutting out the waste and backdoor deals, such as buying votes in Louisiana to get the health care bill passed, cutting out spending for free education and health care for illegal aliens, etc. seems to be a better idea.

If strategies such as the VAT are “poison” in the U.S. because they are a bad idea, and all of the European and Mexican ways of running a country do not work, why try it here? Why not fix the problems there instead of having the U.S. taxpayers bailout out everyone.

Unfortunately, what the American people want is not the agenda of Washington – redistribution is.

I recently gave presentations to junior high school students as well as did business plans for a competition. One of the unique contestants was a professor of statistics at a local university. To both the students and the professor, I simply said, “Math is in everything.”

To give you an idea of what I meant, consider the following items.

Music has ¼ notes and ½ notes.

Macaroni and cheese takes a ¼ cup of milk.

Brownies, I eat more than ½ of the batch when no one else is looking.

Orange is a percentage of the colors red, green and blue.

Money has ½ dollars and borrowing has ½ of a percent.

Compounded interest has the Rule of 72.

When I talk about compounded interest, I use the example of “would you rather have a penny today doubled everyday for thirty days, or $1,000,000? I usually get a about a 50/50 response. The answer is – take the penny. (I show and explain the penny in my book, Barking With The Big Dogs.)

The Rule of 72 is simple math, and a good way to estimate (especially since elementary schools would rather teach estimating first).

Here’s how I explained it to an eleven year old once.

72 divided by 3 equals what number? He answered 24.

For example, let’s say you have $1,000 earning 3% interest. It would take 24 years for you to double your money. The look on his face was disappointing. He said that’s not worth it. That’s an interesting point. (This also happens to be the example used in the stimulus package post that I wrote about last year.)

Take 72 and divide it by the interest rate you are earning. 72 / 3 = 24. Pretty simple. 9% would double your money in 8 years. 72 / 9 = 8. Remember, this is an estimate. Albert Einstein said this was the greatest mathematical discovery of all time.

Make sure you learn math, because it is in everything.

And if you are not looking, the government – not just business, banks and oil companies – might just take ½ of your brownie as well in the form of taxes and hidden taxes – such as VAT (value added tax). With all of the entitlements, bailouts, government paid trips, health care (not the one the politicians receive), etc. how can taxes not go up in some shape, form or fashion?