Democrats Considering a National Sales Tax?

It looks like the cats out of the bag… With the Federal Government now borrowing nearly 50 cents of every dollar spent it looks like the Obama Administration and Democrats in Congress are considering a national sales tax or “Value Added Tax” (VAT) to pay for their out of control spending:

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

“There is a growing awareness of the need for fundamental tax reform,” Sen. Kent Conrad (D-N.D.) said in an interview. “I think a VAT and a high-end income tax have got to be on the table.”

A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American — a tangible benefit that would be highly valuable to low-income families.

This was inevitable… there is no way the Obama Administration and Democrats in Congress can pay for things like national health coverage without finding new sources of revenue… particularly when income tax revenues are falling.

First let me preface this by saying I’m not opposed to a national sales tax or value added tax if it completely replaces the current income tax system. The problem with a VAT tax is that if it follows the European model which places the VAT tax on top of existing income, payroll and corporate taxes it becomes an economy killer that robs consumers of discretionary capital.

Related

• Exploding debt threatens America – Financial Times
• The VAT Cat Is Out of the Bag – Larry Kudlow
• Be Afraid, Be Very Afraid of the Obama Administration’s Scary Trial Balloon – Phil Kerpen, Fox News
• Are You Ready for a VAT? – Mary Katharine Ham, The Weekly Standard