Tag Archives: VAT

Senator: Obama, Congress ‘Intentionally’ Spending to Force Value-Added Tax Implementation

We’ve heard from various elements that President Barack Obama was a socialist trying to “fundamentally change” the United States of America in a covert manner, but maybe it isn’t as covert as it seems.

A recent CNS News analysis of government data shows that in the first 19 months of the Obama administration, the federal debt held by the public increased by $2.5260 trillion – more than the cumulative total of the national debt held by the public that was amassed by all U.S. presidents from George Washington through Ronald Reagan. So why is the government doing this? Larry Kudlow asked Sen. Judd Gregg, R-N.H., that question on his Sept. 9 program, suggesting it was a “giant massive tax trap.”

“Senator, instead of going bankrupt, you know what will happen?” Kudlow said. “It’s a massive tax trap. That’s what’s going to happen. It’s going to be a gigantic humongous, massive tax trap that will doom us to subpar, stagnant, slow economic growth and high unemployment. Isn’t that really the issue?”

According to Gregg, who was at one time Obama’s choice for Secretary of Commerce until he withdrew his name, it’s part of a philosophy that sees the private sector as “under-taxed.”

“Larry, you’re absolutely right,” Gregg said. “This is a very important point for your viewers to understand. This spending is being done intentionally. The reason the GDP –the spending-to-GDP ratio has gone from 20 percent to 24 percent, it’s heading to 27 percent of GDP is because the present government, the present presidency and the present Congress genuinely believe that you create prosperity by radically growing the size of government and they genuinely believe that our society is fundamentally under-taxed and they want to fill the gap between what has historically been our tax revenues, which have been about 18 to 19 percent of GDP and the spending, which they put in place at 24 percent.”

Their end goal with all this spending is not just short-term medicine for the ailing economy. Instead – to “fundamentally change” the American economy: Institute a value-added tax and implement the European social welfare model.

They want to fill it with a value added tax,” Gregg continued. “That is the plan. They’re trying to run the government into the ditch so that the options will be so few and so Draconian and so inappropriate that the only choice that would be left would be to go down the European social welfare mode. Remember, every European country has an income tax, a sales tax, which is their VAT tax, and what they see is the United States only has an income tax. So they say, ‘Well, we can obviously take the European model. If we go down the European road of expanding our government dramatically,’ which is what they’re planning to do and what they’ve actually done with the health care bill specifically, ‘Then we can fill that gap without going down the European model of a VAT tax.’”

And as Gregg explained, that sort of policy gesture would come at a cost.

“That of course reduces the productivity of society, because the more you put a tax burden on society, you basically reduce productivity,” he said. “That costs you jobs and makes you less competitive.”

via Senator: Obama, Congress ‘Intentionally’ Spending to Force Value-Added Tax Implementation.

Charles Krauthammer – Obamacare’s next trick: the VAT – washingtonpost.com

By Charles Krauthammer
Friday, March 26, 2010; A25

As the night follows the day, VAT follows health-care reform.

With the passage of Obamacare, creating a vast new middle-class entitlement, a national sales tax of the kind near-universal in Europe is inevitable.

We are now $8 trillion in debt. The Congressional Budget Office projects that $12 trillion will be added over the next decade. Obamacare, when stripped of its budgetary gimmicks — the unfunded $200 billion-plus “doctor fix,” the double counting of Medicare cuts, the 10-6 sleight-of-hand (counting 10 years of revenue and only six years of outflows) — is at minimum a $2 trillion new entitlement.

It will vastly increase the debt. But even if it were revenue-neutral, Obamacare preempts and appropriates for itself the best and easiest means of reducing the existing deficit. Obamacare’s $500 billion of cuts in Medicare and $600 billion in tax hikes are no longer available for deficit reduction. They are siphoned off for the new entitlement of insuring the uninsured.

This is fiscally disastrous because, as President Obama himself explained last year in unveiling his grand transformational policies, our unsustainable fiscal path requires control of entitlement spending, the most ruinous of which is out-of-control health-care costs.

Obamacare was sold on the premise that, as Nancy Pelosi put it, “health-care reform is entitlement reform. Our budget cannot take this upward spiral of cost.” But the bill enacted on Tuesday accelerates the spiral: It radically expands Medicaid (adding 15 million recipients/dependents) and shamelessly raids Medicare by spending on a new entitlement the $500 billion in cuts and the yield from the Medicare tax hikes.

Obama knows that the debt bomb is looming, that Moody’s is warning that the Treasury’s AAA rating is in jeopardy, that we are headed for a run on the dollar and/or hyperinflation if nothing is done.

Hence his deficit-reduction commission. It will report (surprise!) after the November elections.

What will it recommend? What can it recommend? Sure, Social Security can be trimmed by raising the retirement age, introducing means testing and changing the indexing formula from wage growth to price inflation.

But this won’t be nearly enough. As Obama has repeatedly insisted, the real money is in health-care costs — which are locked in place by the new Obamacare mandates.

That’s where the value-added tax comes in. For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude — if you exempt food, for example, the yield would be more like $900 billion).

It’s the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent.

American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.

Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama’s triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan’s strategy was to starve the (governmental) beast in order to shrink it: First, cut taxes — then ultimately you have to reduce government spending.

Obama’s strategy is exactly the opposite: Expand the beast and then feed it. Spend first — which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.

And the VAT is the only trough in creation large enough.

As a substitute for the income tax, the VAT would be a splendid idea. Taxing consumption makes infinitely more sense than taxing work. But to feed the liberal social-democratic project, the VAT must be added on top of the income tax.

Ultimately, even that won’t be enough. As the population ages and health care becomes increasingly expensive, the only way to avoid fiscal ruin (as Britain, for example, has discovered) is health-care rationing.

It will take a while to break the American populace to that idea. In the meantime, get ready for the VAT. Or start fighting it.