Controlling how much tax I pay based on how much I choose to consume? Sounds like a plan — as an alternative to income tax, not as a supplement to it. Is that what the left has in mind? Somehow I doubt it.
No worries, though. If they didn’t have the stones to close Gitmo, they assuredly don’t have the stones to pass a tax that would hit the poor where they live.
A White House official said a VAT is “unlikely to be in the mix” as a means to pay for health-care reform. “While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers,” said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag…
The VAT has advantages: Because producers, wholesalers and retailers are each required to record their transactions and pay a portion of the VAT, the tax is hard to dodge. It punishes spending rather than savings, which the administration hopes to encourage. And the threat of a VAT could pull the country out of recession, some economists argue, by hurrying consumers to the mall before the tax hits.
What would it cost? Emanuel argues in his book that a 10 percent VAT would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal copayments. In his 2008 book, “100 Million Unnecessary Returns,” Yale law professor Michael J. Graetz estimates that a VAT of 10 to 14 percent would raise enough money to exempt families earning less than $100,000 — about 90 percent of households — from the income tax and would lower rates for everyone else.
And in a paper published last month in the Virginia Tax Review, Burman suggests that a 25 percent VAT could do it all: Pay for health-care reform, balance the federal budget and exempt millions of families from the income tax while slashing the top rate to 25 percent. A gallon of milk would jump from $3.69 to $4.61, and a $5,000 bathroom renovation would suddenly cost $6,250, but the nation’s debt would stabilize and everybody could see a doctor.
Ace reminds us that to pass this now would be an egregious breach of Obama’s promise that no one making less than $250K will pay any new taxes, and while that breach is ultimately inevitable, it’ll surely be delayed until his second term. Exit question: Given that there’s no question you’ll eventually be taxed more to pay for The One’s dream of a Great/Impoverished Society, how would you rather do it? With a sales tax or a higher marginal income tax rate?