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Wednesday, April 7, 2010

Get Ready for VAT

Paul Volcker has spoken.

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.

One guy that is likely sticking his chest out is Charles Krauthammer. He's been predicting this for weeks.

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).

It’s the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent.


In fact, Krauthammer pretty much nailed it besides its introduction after the election. The VAT is great if you're trying to raise revenues quickly. It would also put us one step closer to a Western Europe style Social Democracy. The VAT is very popular there. It helps to pay for the plethora of government entitlement programs.

It would also mean that President Obama would go back on his most famous campaign promise not to tax anyone that makes under $200,000 in income. He may try and pull some misdirection and pretend as though this won't be that type of tax or that he wasn't talking about this type of tax. It won't work. If he does anything to try and implement the VAT, he will lose significant support and never get it back.

8 comments:

AG said...

Here's a fun question: which would be easier to pass: resetting the top marginal tax rate to pre-Reagan levels, or a VAT.

mike volpe said...

VAT is much easier, in my opinion. First, 72% is enormous. Second, VAT is much more difficult to track in a cause effect. Neither will happen.

Anonymous said...

I pay 1% anytime over the potential US dollar gettting devalued due to debt. Likewise I would have taken Hillary's plan ov er Obama's plan 15 yrs later. All we did in last 15 yrs is only increase the health costs. Now the latter is out of hand. The shortsighted political goals are costing the tax payers. They {DC experts}just blame each other for political gains but end result is same...more debt

Anonymous said...

Hi Anonymous,

You can always add 1% of your income voluntarily to your taxes this year and every year, to help out with the deficit. There's no law against that, and, in fact, I encourage you to do so.

However, I suspect that you don't actually pay any taxes; that you're part of that 47% of Americans that gets a free ride off the backs of the rest of us. You're happy to say we don't pay enough because you know it won't cost you a dime.

Get a job, slacker.

Anonymous said...

you don't know me and you have the chutzpah to write this response. I paid 64k in taxes in 2009 and will probably pay lot more next year. I do not want to go into pissing contest with imbecile but for the record, it is close to 2M over last 25 yrs.

I was trying to make sense to Mike's statement of VAT is better than pre Reagan days of progressive tax. I would rather get it over with a flat tax than the annual April 15th tax exercise which is a joke because at my tax rate the deductions allowed are not worth the expense involved. You make 250 k plus and you pretty much lose on kid's college,AMT, home mortgage, healthcare, travel and other deductions enjoyed by the middle class. Knee jerk statement is what you made and shame on you

mike volpe said...

Children please. We are not how much money we make.

First, I didn't say I like the VAT more or less than an income tax hike. I said it had a better chance of passing. It does. It's easier to hide.

That said, we are all equals here.

Anonymous said...

sorry about the rant Mike. What do you think is the way to cut the deficit when the expenses are more than the income? this is neither a republican or democrat issue or rich /poor issue

mike volpe said...

I would cut spending before raising taxes.