With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.
Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.
At a White House conference earlier this year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.
I'm in favor of a VAT tax in principle -- if it replaces the income tax. That which you tax, you discourage. We should be discouraging consumption, not work, savings and investment.
As for the regressive aspect, don't panic. You can give every family a refund check to cover the VAT on the first $40,000 or so of spending, so that the poor pay no taxes and the middle class have a healthy exemption too. Then a VAT tax in the teen percentages replaces the income tax. I would take that deal in a heartbeat.
Of course Pelosi and Obama can't be trusted with a VAT tax. Their maniacal spending would require a VAT tax in addition to outrageous income taxes.