Wednesday, May 27, 2009

VAT Tax?

Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look

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.

Liberals dispute that notion. "You could pay for it regressively and have people at the bottom come out better off -- maybe. Or you could pay for it progressively and they'd come out a lot better off," said Bob McIntyre, director of the nonprofit Citizens for Tax Justice, which has a health financing plan that targets corporations and the rich.

A White House official said a VAT is "unlikely to be in the mix" as a means to pay for health-care reform. "While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers," said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag.

Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book "Health Care, Guaranteed." Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax system, has expressed at least tentative support for a VAT.

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In the interest of fairness we do have to note that the Obama administration has said they are not interested in this tax. As with all Obama statements though, the truth is more in his actions than his words. Hiring a supporter of the tax to work as an adviser is not without concern. Also, having the Chairman of the Senate Budget Committee defending the tax is noteworthy.

If this were to be enacted, it would finally put to rest the whole (false) notion of Obama not taxing the middle class. This would be the most regressive tax in history, irregardless of what they did with the income tax. Keep in mind that a large portion of people do not pay income tax. They will all pay the VAT tax.

I sometimes wonder if I have fallen down the rabbit hole. None of this makes sense to me.

The American auto industry is on the verge of bankruptcy so the administration wants to increase regulations which will make cars more expensive so they will be harder to sell.

To ensure health care for all, the administration wants to tax people who have health insurance, likely reducing the number of people on private insurance.

The economy is in a decline and fuel prices have a direct and strong effect on it so Democrats want to increase regulations and taxes on fuel thus making it more expensive and causing the economy to take a bigger hit.

Unemployment is heading towards 10% so the Democrats want to increase regulations, taxes, and "green" requirements on corporations so they will hire fewer people.

Home sales are declining along with the prices and the solution is to pass the same "green" regulations on new houses, making them more expensive to build.

Now with the economy in decline and unemployment on the rise, there is a movement to punish people for buying goods and services.

Does this all make sense to everyone else and I'm the only dummy who doesn't get it?


LUCKY said...


I hear ya on this one. Even though I have only spent 26 years on this wonderful Earth I feel as if things are quickly turning to chaos around me. I do not understand why a simple principle like balancing how much you pay for things is so hard.

My wife and I have X amount of income per month. We have to make hard choices at times as to what things we really want. Sometime we have to cut things we really think we want like, TV, going out to Movies, going on vactions, eating out at restraunts, and other things.

If we can do this on a lower level why can't it be emulated at a national or state level. There might be seasons where we have a surplus where we can have touchy, feely programs like saving the endangered banana slug(I just made that animal up) and other times where the slug is gonna have to go without. It seems that governments are never willing to cancel programs once they are begun.

If you are going to be fiscal sound there are times you will have to cut somethings to get others and sometimes you will just have to cut things so that you can pay the rent and buy food.

The idea of a national sales tax is something I will just have to deal with if it passes. I won't like it or agree with it but I will deal with it.

I am in favor of a flat income tax all around. It would make the tax code much simpler. Help to cut even more costs by getting rid of alot of the IRS and would save me about five hours or more when I do my taxes each year.

cube said...

I think you know this already, but I'll repeat it for others...

Obama says one thing and does another. Follow his actions, not his words.

Bags said...

You are not the dummy. The inmates are running the asylum! This could get real ugly real soon.

mksviews said...

Two things you can be sure of folks.

One, every stupid failed socialist policy that was tried in the rest of the world will be tried in America.
Two, whatever tax they choke down your throats will not help the ones they promised to help.

"I sometimes wonder if I have fallen down the rabbit hole. None of this makes sense to me."

Think like a leftist and it makes perfect sense Chuck, their ultimate objective is not to better America, sure for the stupid garden variety ones it might be, but not for the likes of hussein. His real objective is to screw over America and what better way to do that than from the inside.

Brooke said...

You get it, Chuck.

Chuck said...

Lucky, if you don't pay your bills, they take stuff away from you (house, car, etc). Maybe we need to take the government away from them?

As far as the flat tax, I am in total agreement. Maybe have a certain exemption to keep the very low income from paying (below the poverty line?). After that you make X dollars, you pay Y in taxes. Fill out your post card and mail it in.

Cube, preaching to the choir

Bags, uglier

MK, I think it's to bring it down so they can rebuild it in His image

Cube, thanks

shoprat said...

As if he isn't getting enough of our money.

Z said...

next thing you know, they'll be asking you to paint your roofs WHITE!!

Chuck said...

Shoprat, there's never enough doncha know?

Z, good idea, I'll drive my SUV to the hardware to get the paint.

El Cerdo Ignatius said...

Chuck, an ad valorum tax might not be a bad way to go, but only if a Constitutional Amendment were passed that would prevent the federal government from levying an income tax.

Without that, take it from a Canadian who pays lots of sales taxes: fight it tooth and nail.

Chuck said...

El Cerdo, thanks for stopping by. I am not I'm not sold on it being a good idea, although there is soemthign said for a use tax. You are right though, we would need an absolute guarantee that there was not an income tax to follow.