Amidst all this uncertainty, just imagine what a master political spin doctor like Mr. Obama could do with vast amounts of additional tax revenues drawn heavily from the wages and savings of the middle class, though widely misperceived to be paid disproportionately by lower-income consumers.
Proceeding from that misperception, he could create a vast new subsidy program that would offset by many multiples the VAT tax actually borne by these newly created welfare recipients. He could also increase the income tax on “the rich,” saying that they and the middle class get a nearly free ride under the VAT compared to less affluent people who must spend everything on purchasing “taxable” essentials. Not so, but the VAT lends itself to spin.
Mr. Obama and Mrs. Pelosi might also use the VAT to fund “free” government-run medical care and hospitals for everyone, as well as “free” college education and “free” home mortgages.
How about a temporary VAT, solely to pay down the federal debt? When was the last time a tax ever went away? Or how about a smaller VAT of only 5%? Obviously, it could quickly grow. Any tax increase big enough to repay much of the huge federal debt would devastate the economy for years to come.