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Speaker Pelosi Hints at Massive Tax Hike

Posted By Curtis Dubay On October 6, 2009 @ 4:47 pm In Economics | Comments Disabled

Speaker Nancy Pelosi joined a growing liberal chorus calling for a massive tax hike through the implementation of a value added tax (VAT) [1]. A VAT is similar to a national sales tax. Businesses would pay it at each stage of the production process and consumers at the cash register. European countries have had VATs for years.

As we pointed out earlier this year, Congress should not pass a VAT to pay for a government takeover of the health care system or expand the size of government [2]. If it does so, it will be a massive tax hike:

Just a 1 percent VAT on all goods and services in the economy would raise $63 billion for Congress to spend each year. Some suggest the VAT rate should be set as high as 20 percent. At that rate, a VAT that covers all goods and services in the economy – including food, clothing, housing, and health care – would collect an additional $1,260 billion a year and cost every U.S. household $10,680 annually.

Even if Congress passes a VAT that has a rate of just a few percentage points, it would likely lead to higher rates in the future. Evidence from other countries that already have VATs show once it is on the books the rate tends to rise over time. [3]

The American people would be better off if Congress stopped spending and instead reformed existing entitlements to make them more affordable and effective. Adding a new entitlement will only make the country’s fiscal situation worse and make painful tax hikes more likely. Unfortunately, that might have been the plan all along [4].


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/10/06/speaker-pelosi-hints-at-massive-tax-hike/

URLs in this post:

[1] Speaker Nancy Pelosi joined a growing liberal chorus calling for a massive tax hike through the implementation of a value added tax (VAT): http://thehill.com/blogs/blog-briefing-room/news/61783-pelosi-says-new-tax-is-on-the-table?page=2#comments

[2] Congress should not pass a VAT to pay for a government takeover of the health care system or expand the size of government: http://www.heritage.org/Research/Taxes/wm2532.cfm

[3] Evidence from other countries that already have VATs show once it is on the books the rate tends to rise over time.: http://www.oecd.org/dataoecd/12/13/34674429.xls

[4] Unfortunately, that might have been the plan all along: http://www.heritage.org/Press/Commentary/ed081009b.cfm

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