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VAT Talk Runs Against Desire of the Country

By: Erick Erickson (Diary)  |  April 26th, 2010 at 02:00 PM  | 

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Our own Brian Darling has more on the VAT at Human Events.

What is a president to do when his gargantuan spending increases threaten to double the national debt and push the federal government into insolvency? A conservative would put together a commission to eliminate waste, fraud, abuse and unnecessary programs (all those things the federal government is doing but shouldn’t be). A liberal would raise taxes.

Well, President Barack Obama may take a page out of the European social democracy playbook by employing a new Value Added Tax (VAT) as a means to balance the federal budget on the backs of American consumers.

According to Dan Mitchell of the Cato Institute, a VAT is “a type of national sales tax, levied on the value-added at each stage of production. Consider a piece of furniture: The VAT would be imposed when the raw timber is sold, when the sawmill produces lumber, when the manufacturer builds a chair, a tax at the wholesaler level and then when a retailer sells the chair to a consumer.” J.D. Foster of The Heritage Foundation argues that liberals love this type of tax, “because it can raise vast new revenues without the taxpayers being really sure who took their money.” Instead of cutting spending, this administration is giving serious consideration to a sneaky new VAT.

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  • reaganiterepublicanresistance

    I live as an expat in Prague, and just bought all new appliances for our Condo- the VAT was 22%. I am looking at new cars… also 22%.- that’s a lot of scratch.

    Even food -FOOD- is 9% VAT! And of course the rates go nowhere but up once they start. The Socialists LOVE the VAT because it’s kind of hidden, built in to prices… but they’re no missing the bottom line effect.

    VAT is to be resisted while new GOP power on The Hill rolls back some spending next year… that’s what we need

    http://reaganiterepublicanresistance.blogspot.com/

  • RINKER

    On Fox News Sunday, they said Pelosi has pledged to vote on the VAT (after the Commission recommends it) in December…will of the people be darned.

  • Hugh

    than the Health Care Bill. I was wrong. VAT would absolutely destroy our ecomomy as we know it. VAT is in addition to the current taxes we pay. We would have nothing left over to start a business, grow a business, or whatever. All would be dependent on government for our needs. I mean ALL. VAT would suck the life blood out of what is left of our free enterprise system. All incentive to improve ones station in life would be destroyed. It must be stopped. If passed it is the final straw that would break the camel’s back.

  • Brian Darling

    the life blood out of free market capitalism. Our nation is in deep trouble if a VAT is imposed on the American people.

  • http://impudent.blognation.us/blog kyle8

    stick a fork in us. With all the current problems we face, and the huge burdens of government. IF we also get one of those it will absolutely crush us economically.

  • texasgalt

    I am done. Who can deal with all these taxes? I *will not* collect or pay a VAT tax. Like the movie War Games, it is becoming clear the only logical move is not to “play”.

    I’d rather cash it in and spend the next 20 working against the statist b*stards.

    Or maybe I will become Ragnar Danneskj?ld*. Loot the looters!

    *What I actually am, Mr. Rearden, is a policeman. It is a policeman’s duty to protect men from criminals ? criminals being those who seize wealth by force. … But when robbery becomes the purpose of the law…then it is an outlaw who has to become a policeman.

  • JHancock

    and it hits the poor and middle classes hardest!!

    For example if you are poor 20% of your income goes to food-with VAT this becomes 21.8% of your income. 20% goes to your car (if you have one)-this becomes 24.4%. 20% goes to your house with VAT now it’s another 24.4% 20% for clothes, diapers, shoes, school books-now 24.4%.

    Before VAT a poor person could consume their normal amount using these 20% of income figures, and have 20% of their income to pay off debt, save for college, save for retirement, or just have a little bit of margin. With VAT this 20% changes to 5%. Either the poor (and lots of middle classers too) will consume less or scratch their heads and wonder where 15% of their income (which represents 75%!!!! of their disposable income) went!!

  • eastbaylarry
  • Flagstaff

    I can imagine Democrat leadership pushing one.

    It seems to be something that would be much easier than “comprehensive immigration reform” to defeat, and look what happened to that.

    If they pass it, it’s a guaranteed issue for Repub’s in 2012. In fact, we should use the rumor this year. The Democrats run on rumors of Repub destruction of Social Security all the time.

  • hickorystick

    Putting a VAT on American commerce wouldn’t change much, we don’t manufacture squat. The pharmaceuticals won’t allow it to be put on their products, Boeing ain’t going for it for anything sold outside US. All this would do is micromanage small business further, being they would have to file. The big boys will go to Congress and get exclusions on their stuff, or failing that, get extra hidden subsidies.
    Him floats this idea because only seven states have a sales tax. If you lived in one, you would know the poorest pay the taxes, and the Boys go to the legislature and get reprieves because their ‘inductry’ is too important to the state. They push back and threaten to leave. On a national scale, it already makes more sense to manufacture outside the US, because you can bring it in for free.
    Now, if he suggested a VAT on foreign manufactured products, that I could agree with. If they come looking for a special break, we can ask them how they been treating women, whales, child labor etc.

  • JHancock

    is it is charged on every step of production that adds value to a product. Take Wine for example-the grapes would be taxed, then a tax as the juice is extracted, then another as this is shipped to a winery and barreled, then again as it is bottled, then finally we pay sales tax, like we already do.

    Even if it is only on Manufactured goods we have a problem. Most auto-makers that sell cars in the US assemble at least 51% of the VALUE of their final product in the US to meet content requirements and avoid tariff levies. With a VAT, every step and item that adds this 51% value would be taxed!!