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.
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?