VAT Chance: Why the Value Added Tax is all wrong

April 13, 2010

Everything has a price. It’s a basic economic principle that most people learn in elementary school, but it seems Barack Obama, Nancy Pelosi and Susan Davis prefer to forget and relearn. Either that or they knew all along that the numbers on the massive healthcare overhaul simply didn’t add up. There is no good answer: Either they were ignorant and somehow missed the massive “hidden” price tag (that pundits and columnists everywhere saw very clearly), or they were not upfront with the American people. Check out the video below:

Charles Krauthammer is right. Obama is not stupid. Now that America has a massive European style healthcare system it needs a massive European style tax to cover it. It appears that Obama and Pelosi’s answer will be a national sales tax or a VAT (value added tax). Last October Pelosi stated that she supported a VAT to generate more federal revenue and on April 6, Paul Volcker, Obama’s economic advisor, suggested that a VAT would be the best way to reduce the deficit.

How would a value added tax work? It would essentially do two things: first, burden the American people and second, expand our already bloated federal government. Here’s a good definition of a national sales tax: “A tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer.” That’s right. You the consumer bear the burden of a national sales tax that would simply be added on top of our already bloated and burdensome tax system. Ron Smith of the Baltimore Sun put it well:

“What’s wrong with this tax? We can begin with the fact that it is the very essence of a regressive tax in that it makes people with lesser incomes pay a far higher percentage of what they have under it than do people with higher incomes”

As a result, we will see a massive step forward in expanding the size of the government. Smith further stated,

“Also, at a time when more and more Americans are aware of and opposed to the relentless growth of government, this is the tax that beyond all others provides the fuel for government gigantism, in part because it is hidden in the price of goods. It is what has made possible the “social democracies” in Europe and the U.K.”

Perhaps Krauthammer himself said it best:

“Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT [in place], Obama’s triumph will be complete. He will have succeeded in reversing Reaganism… Obama’s strategy is… Expand the beast, and then feed it. Spend first — which then forces taxation.”

I fundamentally believe that it is wrong to burden the American people by taxing them to pay for an enormously expensive new policy that the voters never wanted in the first place. But apparently Obama, Pelosi and Susan Davis feel differently. I believe we desperately need legislators who will represent the voice of the people, pursue fiscal responsibility with vigilance, and reduce taxes and reform the tax code, not add to it. That is what I am fighting for, and I am asking you to join me, send a message, and show Davis (and gross fiscal negligence) the door.

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