One of President Barack Obama’s key advisers is pushing the idea of imposing a so-called “value-added tax” on the American people as a way to tame our explosive federal budget deficits.
That plan should be shot down swiftly.
Paul Volcker, a former chairman of the Federal Reserve, promoted the new national tax as “not as toxic an idea as it has been in the past,” The New York Post reported.
But it is. In fact, in some ways it is even worse than income tax hikes.
That’s because the value-added tax is a sales tax that is added bit by bit as goods are produced and finally sold to consumers. In the end, the tax is mostly invisible to consumers, since it is factored into the price of the goods they buy. Such a hidden tax would be far harder for the American people to “get a handle on” and oppose, even though they would be paying higher prices. And it would come on top of the usual sales taxes.
But even if it’s hidden, its effects on our economy would be no less devastating. Adding more taxes to the cost of producing goods would discourage production and reduce economic activity — costing jobs and ultimately reducing government revenue.
But alarmingly, the Obama administration would not rule out a value-added tax. Asked about Mr. Volcker’s backing for the “VAT,” a White House spokesman only spoke in vague terms about the administration’s alleged support for middle-class tax cuts.
The only responsible way to address our horrible annual budget deficits — and the $12.8 trillion total national debt — is to slash unnecessary and unconstitutional spending. The problem is not that the American people are taxed too little but that Congress is spending too much.
Given Congress’ record of spending every dollar it gets (and a lot more), a “value-added tax” would not be used to pay down debt but to increase spending even more. That should be avoided at all costs.