Nancy Pelosi: Value-Added Tax is “On the Table”

I’ve mentioned before that the Democrats were laying the groundwork for a European style Value Added Tax or VAT… I wish I could tell you I was wrong but House Speaker Nancy Pelosi confirm that a VAT tax is “on the table” during an appearance on the Charlie Rose show Monday night:

A new value-added tax (VAT) is “on the table” to help the U.S. address its fiscal liabilities, House Speaker Nancy Pelosi (D-Calif.) said Monday night.

Pelosi, appearing on PBS’s “The Charlie Rose Show” asserted that “it’s fair to look at” the VAT as part of an overhaul of the nation’s tax code.

“I would say, Put everything on the table and subject it to the scrutiny that it deserves,” Pelosi told Rose when asked if the VAT has any appeal to her.

The VAT is a tax on manufacturers at each stage of production on the amount of value an additional producer adds to a product.

Pelosi argued that the VAT would level the playing field between U.S. and foreign manufacturers, the latter of which do not have pension and healthcare costs included in the price of their goods because their governments provide those services, financed by similar taxes.

The sad reality is the Federal Government now borrows roughly 50 cents of every dollar it spends, that’s simply unsustainable over the long term… The Obama Administration and Democrats in Congress are either going to have to radically scale back their agenda (something they won’t do) or raise taxes on broad swath of Americans… Something they’re only too happy to do while saying with a straight face “the deficit made us do it.”

Make no mistake a Value Added Tax added on top of our current income tax system will be an economy killer that hits those who can least afford it the the hardest.

Yes, Mr. President the Individual Mandate Is A Tax

I don’t know about but I didn’t watch Pres. Obama ’s Sunday Talk show orgy… I’ve skimmed through the transcripts and frankly I don’t think I missed much. He really didn’t say anything new, he simply repeated the same arguments he’s been making for months. About the only interesting thing I came across was this exchange with ABC’s George Stephanopoulos:

STEPHANOPOULOS: You were against the individual mandate…

OBAMA: Yes.

STEPHANOPOULOS: …during the campaign. Under this mandate, the government is forcing people to spend money, fining you if you don’t

How is that not a tax?

OBAMA: Well, hold on a second, George. Here — here’s what’s happening. You and I are both paying $900, on average — our families — in higher premiums because of uncompensated care. Now what I’ve said is that if you can’t afford health insurance, you certainly shouldn’t be punished for that. That’s just piling on.

If, on the other hand, we’re giving tax credits, we’ve set up an exchange, you are now part of a big pool, we’ve driven down the costs, we’ve done everything we can and you actually can afford health insurance, but you’ve just decided, you know what, I want to take my chances. And then you get hit by a bus and you and I have to pay for the emergency room care, that’s…

STEPHANOPOULOS: That may be, but it’s still a tax increase.

OBAMA: No. That’s not true, George. The — for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase. What it’s saying is, is that we’re not going to have other people carrying your burdens for you anymore than the fact that right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase.

People say to themselves, that is a fair way to make sure that if you hit my car, that I’m not covering all the costs.

STEPHANOPOULOS: But it may be fair, it may be good public policy…

OBAMA: No, but — but, George, you — you can’t just make up that language and decide that that’s called a tax increase. Any…

STEPHANOPOULOS: Here’s the…

OBAMA: What — what — if I — if I say that right now your premiums are going to be going up by 5 or 8 or 10 percent next year and you say well, that’s not a tax increase; but, on the other hand, if I say that I don’t want to have to pay for you not carrying coverage even after I give you tax credits that make it affordable, then…

STEPHANOPOULOS: I — I don’t think I’m making it up. Merriam Webster’s Dictionary: Tax — “a charge, usually of money, imposed by authority on persons or property for public purposes.”

OBAMA: George, the fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now. Otherwise, you wouldn’t have gone to the dictionary to check on the definition. I mean what…

STEPHANOPOULOS: Well, no, but…

OBAMA: …what you’re saying is…

STEPHANOPOULOS: I wanted to check for myself. But your critics say it is a tax increase.

OBAMA: My critics say everything is a tax increase. My critics say that I’m taking over every sector of the economy. You know that.

Look, we can have a legitimate debate about whether or not we’re going to have an individual mandate or not, but…

STEPHANOPOULOS: But you reject that it’s a tax increase?

OBAMA: I absolutely reject that notion.

With all due respect Mr. President you’re wrong… It is a tax… I says so right on page 29 of the Baucus bill itself:

Excise Tax. The consequence for not maintaining insurance would be an excise tax. If a taxpayer‘s MAGI is between 100-300 percent of FPL, the excise tax for failing to obtain coverage for an individual in a taxpayer unit (either as a taxpayer or an individual claimed as a dependent) is $750 per year. However, the maximum penalty for the taxpayer unit is $1,500. If a taxpayer‘s MAGI is above 300 percent of FPL the penalty for failing to obtain coverage for an individual in a taxpayer unit (either as a taxpayer or as an individual claimed as a dependent) is $950 year. However, the maximum penalty amount a family above 300 percent of FPL would pay is $3,800.

The Presidents contention is so ridiculous that even the AP is calling him out on it:

Memo to President Barack Obama: It’s a tax. Obama insisted this weekend on national television that requiring people to carry health insurance — and fining them if they don’t — isn’t the same thing as a tax increase. But the language of Democratic bills to revamp the nation’s health care system doesn’t quibble. Both the House bill and the Senate Finance Committee proposal clearly state that the fines would be a tax.

There’s no way around it, the individual mandate is a tax… and as David Rivkin Jr. and Lee Casey explain in a Wall Street Journal op-ed it’s an unconstitutional one.

The Tax Man Cometh: Senate Health Reform Bill Includes Many Tax Hikes

The folks at Americans for Tax Reform have examined the Senate Finance Committee health care reform bill announced today and come up with a list of all the tax hikes in the bill:

• Individual Mandate Tax.  If you don’t sign up for health insurance, you will have to pay a tax in the following range:
• Various industry tax grabs based on market share. $2.3 billion PhRMA; $6 billion health insurance providers; $750 million clinical labs; $4 billion medical device manufacturers:
  

  	Single	Family
  100-300% FPL	$750	$1500
  300% FPL <	$900	$3800

• Employer Mandate Tax.  $400 per employee if health coverage is not offered.  Note: this is a huge incentive to drop coverage, as $400 is much less than the average plan cost of $11,000 for families or $5000 for singles (Source: AHIP)
• Corporate 1099-MISC Information Reporting. Currently, only non-corporations providing property or services for a business must be issued at 1099-MISC.  This would expand the requirement to corporations doing business with other businesses.  The amount of reporting needed for an average business would be huge.  Paves the way for full information reporting to the IRS.
• Increase Non-Qualified HSA Distribution Penalty from 10% to 20%.  This makes HSAs less attractive, and paves the way for HSA pre-verification

• Backdoor Death of HSAs.  By requiring that all plans (besides the few that are grandfathered) provided first-dollar coverage for most services, there would be no HSA-qualifying plans available from the Massachusetts-like exchanges

• Excise Tax on High-Cost Health Plans. New 35% excise tax on health insurance plans to the extent they exceed $21000 in cost ($8000 single)

• Report Employer Health Spending on W-2. This is clearly a setup for the easy individual taxation of employer-provided health insurance down the road.

• Cap Flex-Spending Account (FSA) Contributions at $2000. Currently unlimited.

• Eliminate tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D

• Medicine Cabinet Tax.  Americans would no longer be able to purchase over-the-counter medicines with their FSA, HSA, or HRA

Ouch, kiss your health savings account goodbye.

Related

• Jay Rockefeller rips Max Baucus bill – Politico
• Snowe bails on “compromise” ObamaCare bill – Hot Air

WSJ: Connecticut Follows Trenton and Albany up the Tax Charts

The Wall Street Journal takes Connecticut Gov. Jodi Rell to task for her proposal to raise income taxes  on individuals with incomes above $500,000 from 5% to 6.5% this morning… The editorial titled “Jodi Corzine” pulls no punches:

Connecticut grabs $7,007 in state and local taxes per man, woman and child resident, according to the Tax Foundation, more per capita than every state but New York and New Jersey. That’s hardly the company any state would want to keep these days, but the politicians in Hartford seem intent on following Trenton and Albany off the tax-and-spend cliff.

This week Republican Governor Jodi Rell proposed a $1-billion-plus income tax hike, raising the top tax rate to 6.5% from 5% on individuals with incomes above $500,000 and couples with earnings above $1 million to close an expected two-year $8.5 billion budget deficit. The tax hike would be retroactive to January 1, meaning the government would snatch money that residents have already earned. Perhaps she aspires to the nether-world approval ratings of New Jersey Governor Jon Corzine.

Given the size of its deficit, it’s hard to believe that for 200 years Connecticut balanced its budget without any income tax and became the richest state in the bargain. That changed in 1991 when then-Governor Lowell Weicker pushed the state’s first-ever personal income tax with a promise that the rate would remain flat at 4.5%. But the next time the state couldn’t pay its bills, in 2001, the legislature raised Mr. Weicker’s tax to 5%. In 2007, Ms. Rell wanted more money for the schools, so she proposed raising the income tax again. That plan failed, but now comes her “millionaire surcharge,” which Democrats have eagerly endorsed.

The most surprising and frightening statistic from the Journal’s editorial is this one:

Since the income tax became law, Connecticut has experienced a long, slow exodus of jobs and people. The Yankee Institute notes the astounding fact that since 1992, the year the income tax went into effect, businesses in Connecticut have hired a grand total of zero net new workers.

Gov. Rell and the state legislature would do well to remember that and the state’s declining population, Connecticut’s population  has declined in every year but one over the last decade, while looking for solutions to our current fiscal crisis. Raising taxes and continuing to spend money we don’t have is not the answer.

WSJ: Obama Advisers Set Groundwork to Raise Taxes on Middle Class

You don’t have to be an economist to realize the Obama Administration’s budget numbers don’t add up and that he’s going to have raise taxes on more than just those earning more than $250,000.00 to pay for his agenda. With that in mind it’s not surprising that White House economist Larry Summers and Treasury Secretary Timothy Geithner essentially floated the idea of a middle class tax hike on last weekend’s political talk shows:

Few of President Obama’s 2008 campaign pledges were more definitive than his vow that anyone making less than $250,000 a year “will not see their taxes increase by a single dime” if he was elected. And he was right, very strictly speaking: It’s going to be many, many, many billions of dimes.

Asked about raising taxes on the middle class on Sunday on CBS’s “Face the Nation,” White House economist Larry Summers wouldn’t repeat Mr. Obama’s pre-election promise. “It is never a good idea to absolutely rule things out no matter what,” Mr. Summers said—except, apparently, when his boss is running for office. Meanwhile, on ABC’s “This Week,” Treasury Secretary Timothy Geithner also slid around Mr. Obama’s vow and said, “We have to bring these deficits down very dramatically. And that’s going to require some very hard choices.”

These aren’t even nondenial denials. The Obama advisers are laying the groundwork for taxing the middle class while claiming the deficit made them do it.

The liberal establishment is even further along in finally admitting that Mr. Obama wasn’t, er, telling the truth. A piece in the New York Times over the weekend declared in a headline that “the Rich Can’t Pay for Everything, Analysts Say.” And it quoted Leonard Burman, a veteran of the Clinton Treasury who now runs the Brookings Tax Policy Center, as saying that “This idea that everything new that government provides ought to be paid for by the top 5%, that’s a basically unstable way of governing.” They’re right, but where were they during the campaign?

The Federal Government now borrows nearly 50 cents of every dollar it spends, that’s just not sustainable… The Obama Administration is going to have to radically scale back it’s agenda or raise taxes on broad swath of American tax payers. They’ve already floated the idea of a European style Value Added Tax and now they’re setting the table for a “the deficit made it necessary” defense of a middle class tax hike.

After all as the as Wall Street Journal concludes:

The undeniable reality is that you can’t run a European-style welfare-entitlement state without European-style levels of taxation on the middle class (and eventually without low European-style growth and high jobless rates). It’s looking more and more like Mr. Obama’s no-middle-class-tax pledge was one of the greatest confidence tricks in American political history.

Related

• Obama’s Pledge to Tax Only the Rich Can’t Pay for Everything, Analysts Say – New York Times
• You can bet on it: Obama will raise your taxes – Washington Examiner
• 5 reasons why Obama will hike middle-class taxes – James Pethokoukis
• Video: Former CBO director says ObamaCare numbers don’t add up – Hot Air
• Income Tax Surtax Should Not Fund Government Health Care Expansion – Heritage Foundation
• Who Pays Income Taxes? See Who Pays What – National Tax Payers Union

Steny Hoyer: Idiot

From CNSNews.com (emphasis mine):

House Majority Leader Steny Hoyer (D-Md.) said that job growth and economic recovery would not be harmed by a Democratic plan to increase income taxes by $540 billion to pay for their health-care reform proposal because the tax hikes would not affect small businesses.

Hoyer also said he could not think of any small business owners who make enough money to qualify for the higher taxes.

Speaking at his weekly press briefing on Tuesday, Hoyer said that the proposed tax was merely a surcharge on wealthy individuals, explaining that the tax increases were graduated.

“This is a surcharge,” Hoyer said, “on people making over $280,000 as an individual, $350,000 [per year] as a couple and it’s graduated, it goes up as you reach $1 million in income.”

Asked by CNSNews.com whether such a tax increase would affect small businesses and job creation during a recession, Hoyer said: “I don’t know many small business men or women who are making, themselves $280,000 [per year], so I’m not sure that very many small businesses are going to be affected by this.”

With all due respect Congressman you’re wrong. I’d suggest you take a look at the Small Business Administration’s Size Standards which defines small business as follows:

A small business is an concern that is organized for profit, with a place of business in the United States, and which operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.  Further, the concern cannot be dominant in its field, on a national basis.  Finally, the concern must meet the numerical small business size standard for its industry.  SBA has established a size standard for most industries in the U.S. economy.  The most common size standards are as follow:

• 500 employees for most manufacturing and mining industries
• 100 employees for all wholesale trade industries
• $6.5 million for most retail and service industries
• $31 million for most general & heavy construction industries
• $13 million for all special trade contractors
• $0.75 million for most agricultural industries

About one-fourth of industries have a size standard that is different from these levels.  They vary from $0.75 million to $32.5 million for size standards based on average annual revenues and from 100 to 1500 employees for size standards based on number of employees.  Several SBA programs have either alternative or unique size standards, such as the Small Business Investment Company Program.

In other words Congressman small businesses aren’t all mom and pop operations. many of them employ hundreds of people and earn significantly more $280.000 in income. The bottom line congressman is that many of these, not so, small businesses file their taxes as subchapter-S corporations or ‘sole proprietors’ and the $540 billion in new taxes you and your colleagues are proposing will ultimately result in slower economic growth and a loss of jobs.

Related

• Health reform would tax the rich, near-rich – Washington Times
• Health Reform Requires Lawsuit Reform – Wall Street Journal
• PROMISES, PROMISES: Indian health care’s victims – Associated Press
• VA admits its failure to give female veterans proper care – McClatchy
• Small Business Faces Big Bite – Wall Street Journal
• 9 reasons Pelosi’s healthcare surtax is disastrous – James Pethokoukis
• Obama will Repeal Medicare – Dick Morris

House Passes Cap and Tax Bill 219-212

The House of Representatives passed President Barack Obama’s massive Cap and Trade energy tax bill by a vote 219-212 yesterday… 211 Democrats and eight Republicans voted for the bill.

WASHINGTON — Landmark legislation to curb U.S. greenhouse-gas emissions was approved by the House of Representatives in a close vote late Friday, securing an initial victory for a cornerstone of President Barack Obama’s agenda.

The 1,200 page bill — formally known as the “American Clean Energy and Security Act” — will reach into almost every corner of the U.S. economy. By putting a price on emissions of greenhouse gases, such as carbon dioxide, the bill would affect the way electricity is generated, how homes and offices are designed, how foreign trade is conducted and how much Americans pay to drive cars or to heat their homes.

The House climate bill, approved by a 219-212 vote Friday evening, would mandate that 15% of the nation’s electricity come from renewable sources such as wind and solar power by 2020, potentially expanding the market and profit potential for companies in those sectors. Towards that goal, it seeks to boost nascent industries such as wind-generated electricity and solar power.

It’s not clear whether the bill will pass the Senate though. Call your Senators at (202) 224-3121 and urge them to vote no this economy killer… According to an analysis conducted by The Heritage Foundation, the bill would raise energy costs for a household of four, by $436 in 2102, when it’s provisions go into effect, and by an average or $1,241 in 2035. That same families electricity costs would rise up to 90 percent by 2035, gasoline by 58 percent, and natural gas by 55 percent by 2035.

The Eight House Republicans who voted for the Cap and Tax bill are:

Mary Bono Mack (CA) (202) 225-5330
Mike Castle (DE) (202) 225-4165
Mark Kirk (IL) (202) 225-4385
Leonard Lance (NJ) (202) 225-5361
Frank LoBiondo (NJ) (202) 225-6572
John McHugh (NY) (202) 225-4611
Dave Reichert (WA) (202) 225-7761
Chris Smith (NJ) (202) 225-3765

Special thanks to Michelle Malkin for the names and phone numbers.

Related

• The Cap and Tax Fiction – Wall Street Journal
• The Climate Change Climate Change – Wall Street Journal
• The Economic Impact of the Waxman-Markey Cap-and-Trade Bill – Heritage Foundation

Bloomberg.com: House Health-Care Bill to Include $600 Billion in Tax Increases

Bloomberg.com is reporting that the health care overhaul legislation being drafted by House Democrats will include $600 billion in tax increases and $400 billion in cuts to Medicare and Medicaid:

June 12 (Bloomberg) — Health-care overhaul legislation being drafted by House Democrats will include $600 billion in tax increases and $400 billion in cuts to Medicare and Medicaid, Ways and Means Committee Chairman Charles Rangel said.

Democrats will work on the bill’s details next week as they struggle through “what kind of heartburn” it will cause to agree on how to pay for revamping the health-care system, Rangel, a New York Democrat, said today. He also said the measure’s cost will reach beyond the $634 billion President Barack Obama proposed in his budget request to Congress as a down payment for the policy changes.

Asked whether the cost of a health-care overhaul would be more than $1 trillion, Rangel said, “the answer is yes.”

Ehh, what’s another trillion when you’ve already spent, lent or committed $12.8 trillion?

Related

• Congressional Republicans Speak Out against Obama’s Plan for Government-Owned Health Care – CNSNews.com
  
• Dems brace for CBO score – The Hill
• Obama’s issues crumbling – The Hill
• Socialism and Cancer – The New Atlantis
• Government and Health Care: The Good, The Bad, and the Ugly – Cato Institute
• My Drug Problem – The Atlantic
• The Public Health Care Plan: What Seems to Be the Problem? – The Heritage Foundation
• GOP Introduces Alternative to Obamacare

Bernanke’s Deficit Warning

There’s been a fair bit of buzz about Federal Reserve Chairman Ben Bernanke’s remarks about the need for deficit reduction during his testimony before Congress yesterday.

Many commentators are interpreting Chairman Bernanke’s as bad news for Obamanomics and are arguing that deficit fears will force him to scale back his spending agenda. I disagree.

I suspect Pres. Obama and the Democrats in Congress will use Bernanke’s warning to push for broad tax increases to help reduce the deficit and fund his agenda.

James Pethokoukis explains why we should be worried:

WASHINGTON, June 4 (Reuters) – Sorry, Larry Summers. It’s looking more and more likely that you’re going to be stuck in the West Wing for the duration.

See, if your boss fails to reappoint Ben Bernanke as Federal Reserve chairman come January, it would be a public betrayal worthy of the television reality show “Survivor.” For President Obama has no greater ally: Bernanke is truly the gift that keeps on giving.

The latest evidence came on Wednesday during Bernanke’s testimony before the House Budget Committee. The Fed chairman offered a stern warning about America’s huge budget deficits.

“Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance,” Bernanke said.

Tough, but hardly atypical Fedspeak.

Then Bernanke went a step further. He gave significant credence to the view that the recent rise in long-term Treasury yields and mortgage rates was caused by deficit jitters: “These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings.”

Bingo! We have Fed confirmation: those inflation-hating “bond vigilantes” have time warped to 2009 from 1994 and are hot on the hunt for countries that can’t manage their finances.

Now when talk about the return of the bond vigilantes got louder last week, some were quick to declare it bad news for Obamanomics.

Rising rates, the theory goes, could force the White House to trim its future spending plans and return more quickly to a sustainable fiscal path. So long, universal healthcare. Bye-bye, green investments. And Bernanke playing deficit hawk only adds to that momentum, right?

Not really. Chatter about budget deficits and fiscal responsibility is exactly what Team Obama needs right now.

Here’s why: If you buy the theory of bond vigilantism — that credit markets will force interest rates higher in reaction to unsustainable national budget deficits — then you also have believe the White House needs to raise taxes sharply to pay for all its spending programs or risk a bond revolt.

Indeed, plenty of White House staffers, particularly if they worked for Bill Clinton, probably do believe in the theory. It was Clinton, after all, who chucked his investment agenda in favor of a “bond market strategy” to boost growth by persuading credit markets that the administration would balance the books. Read the rest…

Regardless of how you choose to interpret Chairman Bernanke’s remarks the bottom line is the same: Pres. Obama can not pay for his agenda without finding new sources of revenue. He’s going to have to tax rates across a broad swath of Americans, and not just the top 5% as he promised during the campaign. Bernanke’s warning gives him the opening to do just that.

Related

• Our High-Tax, Low-Growth Future – Francis Cianfrocca,  Contentions

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

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