President Barack Obama floated the idea of a massive value-added tax (VAT) yesterday in an interview with CNBC’s John Harwood. When asked if he sees a VAT in America’s future, the President said he was considering options.
“I know that there’s been a lot of talk around town lately about the value-added tax,” Obama said. “That is something that has worked for some countries. It’s something that would be novel for the United States. And before, you know, I start saying ‘this makes sense or that makes sense,’ I want to get a better picture of what our options are.”
Americans for Tax Reform (ATR), a group opposed to all tax increases, quickly pointed out that the president has been performing verbal gymnastics of late in an attempt to avoid a “read my lips” moment on his concrete pledge not to raise any form of taxes for families making less than $250,000.
On two separate occasions over the past two weeks, Obama has implicitly changed his rhetoric to mask his willingness to tax the middle class, saying his pledge only included “income taxes” not “any form of taxes” that he promised during his campaign.
ATR points out in his April 10 Weekly Radio Address, Obama said: “And one thing we have not done is raise income taxes on families making less than $250,000. That’s another promise we’ve kept.”
In a speech on the evening of April 15, Obama repeated the truncated promise: “And one thing we haven’t done is raise income taxes on families making less than $250,000 a year — another promise that we kept.”
The two recent statements stand in stark contrast to Obama’s original promise: “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” (Dover, NH 9/12/08) [Transcript] [Video]
House Speaker Nancy Pelosi (D-Calif.) admitted last October that a VAT was “on the table.”
This president and Congress have given breathtaking new meaning to the term “tax and spend.”
The president’s fiscal 2011 budget as proposed would elevate the federal debt to consume 90 percent of America’s GDP by 2020, a short ten years away. The Obamanomics budget would result in $10 trillion in deficits over the next decade.
The only way Democrats can continue their redistributive wealth plan and spending spree is to heavily tax the middle class. A new income tax would be too in-your-face — even for today’s breed of Democrat.
Instead their plan is to soak the middle class with a VAT that builds a new tax into every single phase of production of an item or good that is borne by the consumer at the end point of sale.
Democrats want to sell the plan as a way to erase the deficits. Pay no attention to the endless increases in entitlement spending. Or the camel’s nose under the tent.
“The VAT is levied on all economic activity that adds value; that is, it taxes the difference between the revenue that a firm receives for its output and the costs that it pays for inputs,” Professor Allan H. Meltzer of Carnegie Mellon University explained. “This difference between receipts and costs is the value added by the firm.”
“For example, when coal and iron ore are sold to a steel mill, the mill pays tax on the value of the steel it sells but deducts the amounts paid for coal and iron ore,” Meltzer continued. “The auto company that buys the steel charges tax on the car it sells to a consumer but deducts the cost of the steel and other inputs. The consumer pays the tax on the auto it buys and thus on all the inputs that went into its production.”
NationMaster.com displays a chart on their website of VAT rates worldwide.
The weighted average of the top 25 countries charging a VAT is 19%. Countries such as Denmark and Sweden pay a VAT of 25%. As a matter of fact, the top 24 countries are in double digits with only #25, Switzerland, at 7.9%.
In Europe the ever-increasing VAT pays for the enormous socialistic wealth redistribution scheme while crippling the economy.
“The European welfare state is a main reason that since about 1980 Europe’s growth rate has fallen below the U.S. growth rate, and reported European unemployment rates have been well above U.S. rates on average,” Meltzer added.
Keep in mind the VAT would be in addition to the income tax — the 53% of Americans who actually paid income tax last year.
Anyone taking odds the other 47% would get a VAT rebate?