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.