It’s official. President Obama wants a value-added tax (VAT) for the United States.
In a nationally broadcast CNBC television interview on Wednesday with John Harwood of the New York Times, Obama said that a VAT would be “novel for the United States.” He repeatedly did not want to rule it out since he “wants to get a better picture of what our options are.” These are not the words of a President who is not considering a VAT, or who has ruled one out. Rather, they are a clear and direct signal to anyone bothering to listen that a VAT is President Obama’s preferred method of raising the taxes to pay for his massive expansion of government spending.
President Obama, House Speaker Nancy Pelosi (D.-Calif.), and Senate Majority Leader Harry Reid (D.-Nev.) desperately want and need new tax revenue. Whether it’s the trillion-dollar bailouts of big banks and unionized auto companies, the nearly trillion-dollar stimulus package (which seemed to stimulate only government employee unions), the trillion-dollar takeover of America’s healthcare system, or the trillion-dollar expansion in discretionary spending, the size and scope of federal spending is changing.
What is a VAT? Put simply, a VAT is a European-style sales tax. It’s assessed on the profits generated at every stage of production (raw material, manufacturer, wholesaler, retailer, etc.), so there is constant reporting and payment. As such, it’s an extremely efficient money machine for big government. The VAT is embedded inside the price of a good (as opposed to the U.S., where sales tax is transparent and on top of the price). As such, people forget they pay it, and European governments have found it too easy to raise the tax repeatedly over time.
