Are You Ready for the Value Added Tax?

Forget the Fair Tax and tax reform in general.

Here comes the VAT -- the Value Added Tax. Economist Larry Kudlow responds to today's Washington Post report:

Everyone should closely read today’s Washington Post story on the value-added tax, or VAT. The cat is now out of the bag. For months I have argued that Team Obama and the Democratic Congress were going to be forced to consider a VAT in order to pay for their extravagant spending. Now borrowing almost 50 cents on every new dollar spent, the Democrats will at some point begin to deal with the politics of deficit reduction as a way of countering Republican criticisms about deficit expansion. And the VAT’s part of their answer.

Senate Budget Committee chair Kent Conrad calls the VAT “fundamental tax reform,” and he argues for a VAT plus high-end income-tax hikes. The WaPo story talks about a White House conference earlier in the year where “a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT.”

Kudlow notes that Obama "blew a big budget hole" in their plans with a cap-and-trade proposal that won't raise enough money for the federal government. Still, if we were talking the elimination of the income tax, a VAT might be a consideration. But that is definitely not what is being discussed here.

... this VAT tax would come on top of existing income, payroll, and business taxes. This is how the European countries and many others do it. And the VAT is a tax imposed throughout the economic food chain, at all levels of production, finally ending up inside the consumer pocketbook.

The VAT is a sure way to permanently depress economic growth. It’s also a sure way to Europeanize the American economy. But at some point, after the economy gains at least some cyclical economic-recovery traction, the Obama Democrats will want to re-label themselves as deficit-reduction fiscal hawks. Hence the VAT, a real bad idea.

He gets an "amen" from me.

What ever happened to that promise that 95 percent of the American people would not see their taxes raised?