The next day, at a breakfast with reporters in Washington, Douglas Elmendorf, the head of the Congressional Budget Office, confirmed that his economists have begun studying how to write a value-added tax, a form of national sales tax, because of growing congressional interest in drafting such a measure.
Elmendorf reminded the journalists of the grim news contained in his agency’s analysis of President Obama’s budget proposals. Agreeing with Bernanke that the current course is “unsustainable,” he said that unless something changes, the U.S. will emerge from the Obama years spending one-quarter more than it collects in revenue — 25 percent compared to 19 percent of the gross domestic product.
Closing the gap “can’t be solved through minor changes,” he said. Revenues projected under current laws would barely be sufficient to pay for Medicare, Medicaid, Social Security, defense and interest on the national debt. Everything else would depend on finding new revenues — or borrowing.
I would only be in favor of a vat tax if the income tax is abolished first. The very idea that “everything else would depend on finding new revenues” is only Washington’s twisting line of thinking. What about finding ways to reduce federal spending instead? I guess our politicians have never ever thought of such a novel idea. And that does not mean shifting taxes to the states through unfunded mandates.
I would only agree to a VAT tax if there is a wholescale replacement of the members of Congress. Without doing that first, you are only giving the spolied children more toys to play with, at our expense.
1, you loose votes if you cut people’s largess. As a practical matter entitlements, once given, can never be cut. Unless, of course, the economy collapses.
But how nice of the Dems to increase the debt so they can ram down higher taxes.
Gosh, I thought that a VAT was regressive. Isn’t that anathema to the socialists…er…progressives? I mean, the poor, minorities, women and children will all suffer the most (disproportionately) under a VAT. It sounds like some sort of nefarious Republican scheme. Oh, the humanity!
I agree with David+, get rid of the income tax (and the IRS) first, and then do a VAT and tarrifs. That is how the country was designed to run, not on invasive and obtrusive income taxes.
The good thing about the VAT from the Government’s perspective is that the total tax is hidden in the final price. That way the taxpayer is left in the dark. This way you can double and triple etc. the tax as well as tax the tax at each stage of manufacture. If you add sales tax on top of that it’s even better.
They are mimicking the VAT tax that exists throughout much of Europe. What it will mean here as a tax on all commodities (unlike the Fair Tax) that will affect everyone -the poor middle class and the rich- If you are poor and need a new shirt or underwear of a TV, you will be paying a tax of 10 – 15% on top of the regular price on those articles (Britain’s VAT tax is currently 15%). It will lead to reduced (more Chinese products??) consumer purchasing which, in turn, will lead to cuts in US manufacturing and manufacturing jobs.
Unfortunately, Mr D.Elmendorf did not speak out at how bad it was going to be. He stated that the Health care bill would produce a surplus of $138,000 billion dollars, or is it BILLIONS more in debt.
He is charge of the CBO?
One comment and one question.
Comment – As byzantine and social engineering oriented as our Federal Tax Code now is, I would expect our good progressive friends in Congress to do something like expand the Earned Income Credit to provide VAT relief to those they deem that need it and can reliably be counted on to exchange their votes for this largesse.
Question (for those that already live under a VAT tax) – If the VAT tax applies to services, such as health care services, tell me how this is going to bend the health care cost curve anywhere but up if thing like doctor visits and all medical tests immediately increase by significant amounts?
Oh, it must be there somewhere…page 1897…page 1898…page1989…whew, has anyone actually read this thing? Is there an e-copy so we can just read it online and do a word search? Transparency?