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VAT Adds NO Value to America

Many do not understand a so-called “value added” tax, or VAT. At every step of production, some value is “deemed” to have been added to the product. By the end of production the cost and price of a product have increased dramatically. An example I heard the other day was from a fellow whose daughter was living and …working in Germany as a lawyer. He had to co-sign a loan for her daughter to buy a car. She bought a VW Tiguan, which in the U.S. costs around $25,000. In Germany, the VAT made the consumer price for the car nearly $60,000.

Why is this tax so popular with government? Because unless the consumer/voter is well educated on what’s happening, he/she is less likely to associate that tax with the politicians who implemented it, thereby increasing the likelihood that said politician will be re-elected.

Don’t let this happen here. America simply can’t afford it.


April 22, 2010 | By Amanda J. Reinecker

Enough with the VAT talk

Some liberals in Congress want to pay for their massive new spending with a value-added tax, a sort of national sales tax on the price of goods at each stage of production. While popular in Europe, such a tax is a bad idea for the United States. And a significant number of lawmakers and even White House officials seem to agree.

Last week, Sen. John McCain (R-AZ) led a brigade of 85 Senators in a vote denouncing a VAT in America. McCain’s non-binding sense of the Senate resolution accurately stated that a VAT would “cripple families on fixed income and only further push back America’s economic recovery.” Better still, McCain’s floor remarks cited Heritage Foundation tax expert J.D. Foster.

Not long after the Senate vote, White House Press Secretary Robert Gibbs insisted that a national consumer tax “wasn’t something that the president had under consideration.” So far so good.

But President Obama seems to be singing from a different song sheet. In an interview Wednesday, the President indicated that a value-added tax on Americans is still on the table for consideration. A VAT ” is something that has worked for some countries,” he said. “It’s something that would be novel for the United States.”

President Obama has stated that his first priority is to figure out how to reduce wasteful spending and reduce the deficit, so he is willing to consider all options. But research by Heritage experts and countless economists reveals that a VAT would actually invite greater spending and economic turmoil, especially as it would be levied in addition to all other taxes.

Imposing a VAT is critical to the left’s “Glut the Beast” strategy, argues Foster, Heritage’s Norman B. Ture senior fellow in economic policy. He explains the liberal strategy:

First, raise spending as fast as possible. Here, Mr. Obama and his allies have been notably successful. As a share of our economy, federal spending is up almost a quarter since 2008. The recent passage of Obamacare promises to keep government spending rising rapidly for decades.

In addition, a value-added tax is less detectable to the consumer, yet very costly. Economist Thomas Sowell explains in his book Basic Economics that “the less visible a tax is, the more revenue can be collected without resistance or electoral retribution by the voters.” So naturally, the heavy spenders in Congress support this option.

The left’s support of a VAT comes as no surprise to some. Former House Majority Leader Dick Armey (R-TX) says he “always believed” the Democrats would add a VAT when they won control of the White House and both Chambers of Congress. “Why?” he asks. “Because they’ve got glutinous spending habits, and they want to spend more, and they need to raise money to do it.”

There’s no question that the VAT would generate massive new revenues for the federal government. But even the largest tax hikes, which are always harmful to the economy, cannot counter the increasing rate of federal spending, particularly on programs like Social Security and Medicare. In addition, the more money we give to the government, the more we depend on it to give back. And, let’s face it, this is never an even trade.

Reducing federal spending and reducing dependency on government are the only workable solutions to lower the deficit and restore prosperity. And a value-added tax does neither.

Lawmakers submit to Obamacare — accidentally

If it’s good enough for the American people, it should be good enough for Washington lawmakers, right? Maybe.

In their haste to pass Obama’s healthcare overhaul, liberals in Congress overlooked one detail—they have inadvertently made themselves ineligible for the top-notch health care plans previously available to them through the Federal Employees Health Benefits Program, and instead have accidentally subjected themselves to the disastrous effects of Obamacare.

The Congressional Research Service released a report detailing the provisions in Obama’s healthcare reform bill that would require members of Congress and their staffs to surrender their FEHBP coverage in exchange for nationalized insurance. This would leave Congress in an interesting quandary: since the federal exchange will not take effect until 2014, the members and their staff would be left without insurance until then.

» Read the ongoing Side Effects series on Heritage’s Foundry blog for more stories like this

Jerry Markon of the Washington Post writes: “The confusion was one of several potential problems that congressional Republicans and health-care experts have raised over how the landmark legislation affects members of Congress and their staffs.”

Devonia Smith points out in the Washington Examiner that “the law puts Congress in the same boat they built for the rest of America, without a clue what the new health care reform will mean to them.”

But Congress needn’t have worried: the Office of Personnel Management released a statement this week citing a “drafting error” in the bill, which did not specify the date at which lawmakers will be required to relinquish their current insurance plans. Because of this oversight, members of Congress will be able to keep their current FEHBP plans until 2014—news that was received with sighs of relief[w1] .

And even when the federal exchanges do come into existence, a whole slew of exemptions built into the language of the bill excuses many federal employees and even White House staff from having to participate.

This is just one example of the dangers of rushing to pass poorly designed, unpopular legislation. The fact that Congress can’t even manage its own health care plan does not bode well for American citizens. Though they may have found a way to finagle their way out of this predicament, they are still leaving the American citizens with a sloppy, substandard health care program.

— Eva Brates



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