Surprise: Obama administration starts floating the idea of a VAT

Via the NY Post:

Acknowledging it would be a highly unpopular move, White House economic adviser Paul Volcker said yesterday the United States should consider imposing a “value added tax” similar to those charged in Europe to help get the deficit under control.

A VAT is a national sales tax that, like state and city sales taxes, would be collected by retailers.

Volcker, at the New-York Historical Society, told a panel on the global financial crisis that Congress might also have to consider new taxes on carbon and energy.

The VAT suggestion was immediately met with outrage by Republicans.

“It shouldn’t surprise anyone that the Obama White House would advocate a European-style tax to help finance their European-style government health-care plan,” said Brian Walsh, a spokesman for the National Republican Senatorial Campaign Committee.

“When you hear things like this, though, it’s almost as if the Democrats think the American people will forget that we’re in this situation because of their reckless spending agenda.”

Volcker, a former chairman of the Federal Reserve, told the global economic panel that a VAT is “not as toxic an idea as it has been in the past.”

He added, “If, at the end of the day, we need to raise taxes, we should raise taxes.”

The tax has long had backing from House Speaker Nancy Pelosi (D-Calif.), who last year said it is “on the table” for dealing with the country’s fiscal woes.

James Pethokoukis predicted this late last year:

Does President Obama have a secret plan to raise taxes on middle-class Americans — and,well, pretty much everybody else — with a European-style, value-added tax? Actually, it’s not such a big secret. Connect the dots:

1) The joint statement from the just-concluded G20 Summit in Pittsburgh called for balanced global growth — which means Americans must spend less and save more and reduce its budget deficit.

2) That same weekend, John Podesta, co-chairman of Obama’s presidential transition team and an outside White House adviser, tells a Bloomberg reporter that a value-added tax is “more plausible today” than ever, adding that “there’s going to have to be revenue in this budget.” A VAT is a kind of consumption tax.

3) Yesterday, the Center for American Progress, the liberal think tank with close White House ties, holds a conference on the rising national debt. While speaker after speaker — Paul Krugman, Roger Altman, CAP President Podesta (again), Laura Tyson — admits entitlement spending must be reduced, they also agree that taxes must be raised. Altman suggests $400 billion in new tax revenue is needed almost immediately to calm financial market fears, and a VAT would be a great way of doing it. That’s $400 billion a year, by the way, not over ten years.

4) Also, yesterday was the first meeting of President Obama’s tax reform panel led by former Federal Reserve Chairman Paul Volcker. In a two-part interview with Charlie Rose airing yesterday and today, Volcker says that if Washington can’t get spending under control, either a VAT or a carbon tax would be effective revenue raisers. “Those are two big ones,” he says.

5) As they used to say in the Soviet Union, “It’s no coincidence.” This is also the conclusion of one Washington insider with ties to the White House economic team: “Does this all add up to a trial balloon? Of course, it’s a trial balloon. And I expect the administration will propose major tax reform, including a VAT.”

Obama’s campaign promise to not raise taxes on households making less than $250,000 a year was always considered a joke here inside the Beltway. It’s the economic “consensus” — and this was true even before the financial meltdown and recession — that rising entitlement costs would eventually mean a higher tax burden for the American people.

Maybe it was a joke inside the campaign, too. Since being elected, Obama has raised cigarette taxes and has advocated raising healthcare taxes, energy and small business taxes, in addition to corporate taxes. What’s more, economic advisers like Larry Summers seem eager to get rid of all the Bush tax cuts, not just those on so-called wealthy Americans.

If there’s only one honest thing that Secretary of State Hillary Clinton has said during her time serving as part of the Obama admnistration, it’s gotta be this, from back in November:

LAHORE: The leadership of Al Qaeda is in Pakistan, US Secretary of State Hillary Clinton said on Thursday.

“I find it hard to believe that nobody in your government knows where they are and couldn’t get them if they really wanted to,” she added.

“Maybe that’s the case; maybe they’re not gettable. I don’t know… As far as we know, they are in Pakistan,” Clinton told senior Pakistani newspaper editors in Lahore, AFP reported. “The percentage of taxes on GDP (in Pakistan) is among the lowest in the world… We (the United States) tax everything that moves and doesn’t move, and that’s not what we see in Pakistan,” she said.

Darleen Click is short, sweet, and to the point:

Let’s see, Obama expands “entitlements” to consume 1/6 of the American economy, he more than triples the deficit in his first year including a 800+billion dollar “stimulus” and increasing Federal employment and now they want to impose a VAT and an energy tax to cover it all.

Never let a crisis go to waste?

Welcome to Euromerica!

Yes. It’s a scary thought indeed when you think that Obama is trying to out-Europe Europe.

Ruby Slippers has much, much more on the prospect of this administration implementing a VAT, and points to this piece Charles Krauthammer wrote about it a couple of weeks ago:

But this won’t be nearly enough. As Obama has repeatedly insisted, the real money is in health care costs — which are now locked in place by the new Obamacare mandates.

That’s where the value-added tax comes in. For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude — if you exempt food, for example, the yield would be more like $900 billion).

[...]

Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama’s triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan’s strategy was to starve the (governmental) beast in order to shrink it: First, cut taxes — then ultimately you have to reduce government spending.

Obama’s strategy is exactly the opposite: Expand the beast, and then feed it. Spend first — which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.

And the VAT is the only trough in creation large enough.

As a substitute for the income tax, the VAT would be a splendid idea. Taxing consumption makes infinitely more sense than taxing work. But to feed the liberal social-democratic project, the VAT must be added on top of the income tax.

Ultimately, even that won’t be enough. As the population ages and health care becomes increasingly expensive, the only way to avoid fiscal ruin (as Britain, for example, has discovered) is health care rationing.

It will take a while to break the American populace to that idea. In the meantime, get ready for the VAT. Or start fighting it.

Let the fight begin.