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  • Out of Money? Value-Added Tax Next Up

    Massive increases of spending by the Obama Administration, from the stimulus to its proposed budget, have created historically unprecedented large deficits that will push the nation’s debt level to unsustainable levels.

    It was only a matter of time before the proponents of big government began their push to substantially increase the amount of revenue raised by the federal government to close these budget gaps and pay for other big-government priorities like nationalized healthcare.

    The tax hike proposals offered so far—such as taxes on sugary drinks or tax hikes on alcoholic beverages—would not raise anywhere near enough revenue to make even a tiny dent in projected deficits.

    And President Obama has made it impossible to get the revenue from the income tax because of his constraint that taxes cannot be raised on anyone making under $250,000 (even though he has already broken this pledge). There is just not enough income of the rich to squeeze to pay for all this spending.

    That leaves something akin to a national sales tax as the only option.

    Enter the Value Added Tax (VAT). From today’s Washington Post:

    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.

    A VAT is levied on the “value added” to goods and services as they pass through each stage of the production process, but the cost is ultimately passed on to the consumer. And unless otherwise required by law, the cost of this tax is embedded in prices and hidden from consumers.
    A VAT would be a disaster for the U.S. economy. As explained in the Heritage Foundation Backgrounder “Beware the Value-Added Tax”, a VAT would:

    • expand the size of government;
    • inadvertently increase income tax rates; and
    • slow economic growth and destroy jobs.

    Congress and the Obama Administration should focus on cutting spending and reforming entitlement programs to make them sustainable in the long-term instead of expanding the size of government and badly damaging the economy and destroying jobs in the process.

    Posted in Economics [slideshow_deploy]

    9 Responses to Out of Money? Value-Added Tax Next Up

    1. Dan - Michigan says:

      If my family and I ran our finances like the U.S. Government – we would be in JAIL!

    2. ozzy6900 says:

      Once President Obama runs out of Rich people, Fat CEO's and Big Corporations to tax, who is going to pick up the slack? The Middle Class you say? How? WE WORK FOR ALL THOSE ABOVE! We will be out of work by then! So again I ask, who picks up the slack? The welfare recipients? The homeless? the derelicts?

    3. James Raider, WA says:

      Obama continues to tell each audience what it wants to hear, but the dishing out of the stimulus money is backfiring audibly.

      http://pacificgatepost.blogspot.com/2009/05/obama

      His stimulus money is not so free.

    4. Richard, AL says:

      And why shouldn't BHO and the rest of the Fascists add a VAT into the mix. After all, he's "Changing" America into what western Europe is and they have a VAT. Soon, we can expect a total tax rate (income, VAT, Cap & Trade et al.) in the neighborhood of 75% (or more). After all money doesn't grow on trees; it is stolen from those who are productive to pay for those who aren't and those who promise so much. Hurray for Socialism, Marxism and all the other "failurism" models.

    5. Kent, VA says:

      Isn't extraordinary taxation and a lack of proper representation by those passing those taxes into the system — isn't that what we fought a Revolution over?

      D.C. should go back to their history books — NOT the revisionist ones they grew up with. Oh, and they'd better slow down their reading of Mao and Marx.

      I don't know why we've come so far to founder so terribly. The rocks and shoals around our Republic once seemed fairly strong. But the erosion of a Progressive Educational system has done quite a work on those boulders. They're boulders no more, I'm afraid.

      Oh, By the Way, write, call, fax, email your Senators to defeat H. R. 985 — which gives members of the executive branch undo protection. They won't have to produce documents except in exceptional cases. I.E. President Obama will never have to establish that he is constitutionally able to hold the office of President of the United States.

      This is serious. This Bill MUST be defeated.

    6. AC says:

      Your 'article' is propaganda, and your conclusions are humorously unfounded. The VAT is a good solution for the economic minefield the last administration has inflicted on America. If will mean that most people will not need to pay Federal income tax – ever. It will mean universal health care – something that defines a first world nation. It will enable us to pay off the insane level of debt the last administration has inflicted on us, and future generations. The VAT must come, and the lunacy of the last eight years must be put to rest.

    7. Larry, Green Valley, says:

      Over tax and over spend is what our federal and state governments do best, and we the taxpayers have no control over this fiscal madness.

      We are now experiencing what it's like living under a socialistic state of governance that doesn't place any value on fiscal discipline and will lead this nation into bankruptcy.

      If taxpayers (individual and businesses) value freedom from excessive taxation, then they must ban together and petition those in Congress and our President to promote a federal balanced budget amendment to our nation's constitution. The amendment would demand that spending be reduced to resonable and managable level with a long-term objective of reducing our nation's debt, not adding to it. If they choose to ignore this petition they should all be voted out of office.

    8. Chris Pedersen Nixa, says:

      Why doesn't Obama end his power trip of self ego, and seriously examine one of the greatest American ideas in the history of this Nation developed by three Brave American "white men" [Ms.Sotomayor] investing $22 million of their own private money, developing the boilerplate research.

      Pass the Fair Tax Plan H25/S1025, restoring faith in the American People. We'll pull this Nation up by its bootstraps by abolishing the I.R.S a/k/a the[Internal Racketeering Service ] of The United States of America, the dragconion punisher of American success. They're the biggest waste of time and money. $400 billion and rising in compliance cost every year.

      Oh yeah , but that would strip the unmidigated power away of Congress, transfering it back to We The People . It would eliminate the lobbyist of K-Street ending their combined joint class warfare game of picking the winners and loosers, instead of removing the tax burden on capital and labor making America "The Tax Haven Of The World", thereby creating more good jobs than this Nation has ever seen in its history. Foreign investment boom. Cheaper exports. Ending currency minipulation by China. Walmart would reduce prices overnight. Untaxing the poor and in particular every African American community.

      It seems that every good idea for the future of this Country is turned on its head by the Obama Administration with the most radical [beyond left field] agenda, ignoring the benefits for every American citizen. Why does he remain silent?

      He needs his head examined ! The American People deserve better and should stage a nationwide strike.[ He loves the Unions, let give him a taste of collective bargaining ].

      Do exactly the opposite of what he wants us to do. Call in sick. A case of the "Blue Flue"? Sell off your stocks, bonds. Put your 401k into an IRA. Make a run on the banks withdrawing your money. Instead of buying an American made car,truck buy a foreign made vehicle.Don't trade in your "clunker" just sell it outright. We're already in pain, let's do some self inflicted pain to teach him a lesson like no other president has ever experienced. Never!

      If he is going to drag us down to nothing, becoming a weaker Nation by the minute, hour, day , week, month, and the years ahead he has remaining in office, I say lets join together in rebellion and crash the whole darn Country. It's happening right before our eyes anyway. Get it over with once and for all. Lets begin reducing him to a mere nothing, more so than the joke he has become in the view of the entire World already not to mention all conservatives. The World is laughing at us rolling around on their floors! With the exception of Israel. They never thought for a minute they would be abandoned by the United States until this idiot arrived.

      Lets make him a lame duck in less than a year. I mean reducing him completely and totally to meaningless. When he comes to his senses [ if that is at all possible ] we go back to rebuilding the Country from scratch under OUR DICTATE from the bottom up, like our Forefathers intended under the Principles of the U.S. Constitution.

      Just imagine if the American people next April 15 told the IRS to take a hike, and no one filed in protest! Demanding the passage of The Fair Tax Plan, NOW ! No ifs, buts or maybe's about it. We have the ability to cripple obama bringing him to his knees, stopping him in his tracks, forcing him to reverse many if not all of his blunders because of his now proven inexperience. This disaster calls for extreme remedial measures and action by those who believe in this Country's values, morals and principles under the Constitution. There wouldn't be anything he could do about it either, except bow down to us instead of the Saudi King. Who the hell does he think he is anyway?

      When he bowed to the Saudi King, I thought Obama was picking up the "change" the King may have dropped! Obama's the biggest joke in the Oval Office ever in my lifetime. He makes me sick, but I'm afraid he may tax the barf bag I'll need. Wake up Michael Steel, advocate the Fair Tax Plan nonstop for the 2010 mid-term elections. Lets "get'er done"!

    9. Mark PA says:

      I'm a small manufacturer and do many assembly (value add steps) in the US.

      Let's see……. how to avoid the VAT so my products are more competitive ? Simple, outsource all the "value add steps" I pay US citizens to do, to another country and import the completely finished item……… outsource the value adding function, offshore.

      These morons (communists in my opinion) are also upping the employeer's cost to employ people in the "employeer's share" on payroll and in health care. Basically they are doing everything possible to disincent me from hiring people.

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