#1 - Value Added Tax is on Obama's Table
The President is about to create a new tax, a Value Added Tax or VAT. VAT is similar to a national sales tax except that the increased priced is not added at the check out register but instead included into the retail price of the product. There is no readily easy way of determining what is the product's cost and what is the Value Added Tax.
Contrary to what some news outlets report, the Obama Administration has not ruled out imposing a Value Added Tax, as evident in the President's
CNBC interview on Wednesday. White House Press Secretary denied a VAT was in consideration only for a counter statement by the Vice President who, later that day on
The View, stated "a national sales," which is a euphemism for the Value Added Tax, is something that "the President is listening to."
The VAT is a highly regressive tax, meaning that it consumes a higher percentage of income the less money you make, and this is the double edge sword that is both promoting it AND decrying it. Some advocates on the right, like Bruce Bartlett, admire its regressive nation
"One important benefit of a VAT insofar as those with low incomes is concerned is that they would be contributing something to the general cost of government. Everyone benefits from things like national defense, and everyone ought to pay something for it. But as it is, 47% of those filing federal income tax returns have either a zero or negative tax liability; that is, they pay nothing but still get a tax "refund."
This may be the one tax that is Conservative-approved. Even
Glenn Beck and Bill O'Reilly gush over VAT.
It should be noted, however, that Bartlett and his ilk often fail to include the fact that half of Americans pay a variety of fees, tolls, taxes, including FICA and local taxes, that consume a higher, overall tax burden from their net income than these taxes do on the more affluent.
And, again, the regressive nature of the VAT has its opponents as stated by Democratic Senator Charles Schumer,
"The whole idea is the VAT will replace other taxes, but it never does – when you add in a tax, the old taxes stay and the new tax starts," Sen. Schumer said. "At this time of recession, to be talking about any types of tax increases doesn't make sense."
The New York Senator may be an exception, however, as the fairly liberal nations of Europe are the model which the US will follow if it were to implement a VAT. Many EU countries have VATs that hover around a 20 percent tax to the price of most products.
Excluded from all of the discussions about the VAT is any talk of repealing the Income Tax. The media argue talks how VAT is better than the Income Tax as a selling point. This has possibly made that a repeal of the 16th Amendment is presupposed. It is not on Obama's table. So a national sales tax would become a new additional tax. Some may say that this violates Obama's campaign promise to not raise taxes on anyone making under $250,000 a year. But the Administration is now saying that that pledge only meant the Income Tax. So a Value Added Tax is very much on Obama's table.
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