A New Tax?

Paul Volcker, the former Federal Reserve chairman and current economic advisor to President Obama, said last week that a VAT or Value Added Tax should be imposed on the American public in order to curb runaway spending and the increasing national debt. A VAT is a form of sales tax by taxing the value added through each stage of the production process (this would apply to services as well). A VAT is an inclusive tax, meaning that it is included in the price the consumer will pay, hiding the actual tax within the price of the product (transparancy?). This system of taxing is commonplace in Europe and is even required to be a member of the European Union.

This is a terrible idea and would break one of President Obama’s main campaign promises (not raising taxes on any family making more than $250,000 a year…remember that one?) by raising taxes on everyone in the country, regardless of your income. This would not be the only time President Obama has broken a campaign promise, but it might be the most obvious. Some argue that a VAT is actually regressive and they would be right. That should raise some eyebrows on the left, who believe in strong progressive taxes.

President Obama wouldn't seriously consider this new tax, would he? After all, the new health care reform passed a couple of weeks ago actually reduces the deficit...right? Or could it be that the accounting gimmicks of the health care reform were just for show and that this new entitlement program will cost much more than anticipated?

The government has never been wrong before in its estimates of what entitlement programs will cost in the future. What about Social Security, Medicare, and Medicaid? These were all grossly underestimated and all passed with bipartisan support. The new health care reform, however, was strictly partisan and win or lose, it will be purely the Democrat’s bill.

Why now are advisors to the Obama Administration talking about new taxes? Our economy has not recovered from "the greatest crisis since the great depression" yet a new VAT is suddenly necessary? If this is ever enacted, there is no turning back. This would be yet another example of government confiscation of private property.

Mark my words, if a VAT is ever enacted the fact that this would be a blatant broken promise by President Obama will be dispelled. Most likely he inherited the problem from the prior administration. Additionally, the Left should just have as much a problem with this idea as the Right.

A similar idea has been proposed, which has been mainstreamed by Neil Bortz and Georgia Congressman John Linder; however, their idea is to replace the income tax with a national consumption tax, not in addition to the income tax. Read more about The Fair Tax here.

The idea that additional taxes are now needed, without considering reduced spending or using common sense free-market solutions to make the government more efficient (maybe putting government contracts out for bid) is unacceptable.  Once a VAT is enacted, it will be almost impossible to change.  Remember, once government has a power, they do not want to give it up.

A Value Added Tax is merely the way President Obama wishes to make us more like Europe. President Obama does not realize that this would significantly increase the already record unemployment rates, decrease the incentive to innovate, and hurt the portion of the population that President Obama says he is advocating for.