Ain't VAT A Shame: A tea party told-you-so on taxes

by: daniel clark | published: 02 24, 2010

During last spring's tea party demonstrations, the liberal media ridiculed the participants for naming their events after history's most famous tax revolt. Reporters wondered aloud whether those ill-informed red-state troglodytes understood that they were among the 95 percent of Americans who had received a tax credit from President Obama. The protesters were characterized as not only unintelligent, but paranoid, and, as if you hadn't guessed, racist.

Of course, taxation was only one facet of the tea party rallies, which were driven by more general concerns about an increasingly irresponsible, intrusive and extraconstitutional government. When a new president proposes a dramatic expansion of the federal government's size and power, however, you don't have to be clairvoyant to predict that massive tax hikes are right around the corner.

Upon announcing the creation of his National Commission on Fiscal Responsibility and Reform, Obama publicly retreated from his promise not to raise taxes on anyone earning less than $250,000 a year. "The whole point of it is to make sure that all ideas are on the table," he told Bloomberg News, "so what I want to do is to be completely agnostic, in terms of solutions."

In that same interview, the president said, "The real problem has to do with the fact that there is just a mismatch between the amount of money coming in and the amount of money going out. And that is going to require some big, tough choices that, so far, the political system has been unable to deal with." Obviously, the amount of money going out is not his chief concern. By appointing the commission, he is seeking to raise taxes, while letting an unaccountable and ostensibly bipartisan entity take the blame.

Obama has appointed former Clinton chief of staff Erskine Bowles as the committee's Democrat co-chairman. If he really wanted all ideas to be on the table, he would have balanced Bowles' presence by appointing a Republican ex-Senator like Rick Santorum, who was instrumental in passing welfare reform in 1996, or Fred Thompson, who was last year's only presidential candidate to publish a specific plan to reform Social Security. Instead, he chose Alan Simpson, who, when he was in the Senate, was known for his willingness to collaborate with the Democrats to raise taxes.

One option the commission is expected to take up is the value-added tax, or VAT. This is a form of consumption tax in which a product is taxed at every stage of production, so that a manufacturer would pay a tax on the raw materials it purchases, and then the consumer would be taxed on the cost of the entire product, minus the cost of the materials for which the manufacturer has already been taxed. Since the manufacturer would naturally pass its tax burden on to its customers, the total cost to the consumer would be similar to that resulting from a conventional sales tax.

Some tea partyers have themselves advocated the VAT as a replacement for the income tax, which they want to abolish. Obama's commission, on the other hand, will be considering it as a supplement to the income tax -- which they are already planning to increase, by letting President Bush's tax cuts expire. Ironically, it was those cuts that had nearly doubled annual tax revenues during the Bush administration, a point that is sure to be ignored by those who are now seeking to replicate that result.

Not that a VAT wouldn't trigger a boom in federal tax receipts also. Being an entirely new source of revenue, every dollar it took in would be a dollar more than the government is collecting already. As long as nobody cared about where that money was coming from, it would appear to be the ideal solution. Besides, a lot of European countries have both an income tax and a VAT, which automatically makes it seem like a brilliant idea to American liberals.

Both co-chairmen Bowles and Simpson have said that the VAT is "on the table," echoing what Speaker of the House Nancy Pelosi had declared last October. While the liberals running our government continue to go through hundreds of billions of dollars the same way Al Gore goes through gallons of jet fuel, they're telling us that hanging another millstone around the neck of the American taxpayer is something that needs to be considered. If only news reporters and editors hadn't had their noses so high in the air during the tea party events, then they, too, might have seen this coming.

-- Daniel Clark is a Staff Writer for the New Media Alliance. The New Media Alliance is a non-profit (501c3) national coalition of writers, journalists and grass-roots media outlets.

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