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Friday, April 23, 2010
Akaka votes for Federal Value Added Tax-modeled on Hawaii GE Tax (Inouye opposes)
By Heritage Foundation @ 2:20 PM :: 10026 Views :: Energy, Environment, National News, Ethics

Michelle Obama:  “You can't really understand Barack until you understand Hawaii.”

Enough with the VAT talk

Some liberals in Congress want to pay for their massive new spending with a value-added tax, a sort of national sales tax on the price of goods at each stage of production. While popular in Europe, such a tax is a bad idea for the United States. And a significant number of lawmakers and even White House officials seem to agree.

Last week, Sen. John McCain (R-AZ) led a brigade of 85 Senators in a vote denouncing a VAT in America. McCain's non-binding sense of the Senate resolution accurately stated that a VAT would "cripple families on fixed income and only further push back America's economic recovery." Better still, McCain's floor remarks cited Heritage Foundation tax expert J.D. Foster.  (Roll Call HERE  Inouye voted yes with Mc Cain’s anti-VAT resolution, Akaka voted nay, for the VAT.)

Not long after the Senate vote, White House Press Secretary Robert Gibbs insisted that a national consumer tax "wasn't something that the president had under consideration." So far so good.

But President Obama seems to be singing from a different song sheet. In an interview Wednesday, the President indicated that a value-added tax on Americans is still on the table for consideration. A VAT " is something that has worked for some countries," he said. "It's something that would be novel for the United States."

President Obama has stated that his first priority is to figure out how to reduce wasteful spending and reduce the deficit, so he is willing to consider all options. But research by Heritage experts and countless economists reveals that a VAT would actually invite greater spending and economic turmoil, especially as it would be levied in addition to all other taxes.

Imposing a VAT is critical to the left's "Glut the Beast" strategy, argues Foster, Heritage's Norman B. Ture senior fellow in economic policy. He explains the liberal strategy:

First, raise spending as fast as possible. Here, Mr. Obama and his allies have been notably successful. As a share of our economy, federal spending is up almost a quarter since 2008. The recent passage of Obamacare promises to keep government spending rising rapidly for decades.

In addition, a value-added tax is less detectable to the consumer, yet very costly. Economist Thomas Sowell explains in his book Basic Economics that "the less visible a tax is, the more revenue can be collected without resistance or electoral retribution by the voters." So naturally, the heavy spenders in Congress support this option.

The left's support of a VAT comes as no surprise to some. Former House Majority Leader Dick Armey (R-TX) says he "always believed" the Democrats would add a VAT when they won control of the White House and both Chambers of Congress. "Why?" he asks. "Because they've got glutinous spending habits, and they want to spend more, and they need to raise money to do it."

There's no question that the VAT would generate massive new revenues for the federal government. But even the largest tax hikes, which are always harmful to the economy, cannot counter the increasing rate of federal spending, particularly on programs like Social Security and Medicare. In addition, the more money we give to the government, the more we depend on it to give back. And, let's face it, this is never an even trade.

Reducing federal spending and reducing dependency on government are the only workable solutions to lower the deficit and restore prosperity. And a value-added tax does neither.


RELATED: “VAT”--Hawaii’s GE Tax to be model for Obama


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