Predictable: Gov’t considering national sales tax

As predictable as the sun rising in the morning, the federal government is now seeking new “revenue streams” for increased spending and new socialist programs. One of the ideas on the table is adding a national sales tax, euphemized as a “value added tax,” to pay for government health care among other things.

Just for the sake of clarity, this would not be a policy such as the Fair Tax which seeks to replace the federal income tax with a national sales tax, this new policy would be a sales tax in addition to the current income tax.

Story from Fox News:

As lawmakers toy with the idea of an across-the-board sales tax on just about everything, tax reform advocates are starting to drum up opposition with the same fervor they employed during last month’s anti-tax tea parties.

The idea of a national sales tax was once unlikely. But now that the federal government is doling out billions in stimulus spending and bailouts, and looking for billions more for health care reform, the prospect could be gaining some traction.

The frenzy over the idea kicked up after a Washington Post article Wednesday reported that Congress is starting to pay closer attention to this largely academic proposal and that the Obama administration, though shushing speculation, is soliciting advise from supporters of the idea.

“It should certainly raise alarm bells that they think they can inject it into the debate,” said Phil Kerpen, policy director at Americans for Prosperity.

The value-added tax, or VAT, as it is called, amounts to a tax-on-everything — or TOE, for the acronym-inclined. It’s a tax on goods that’s applied in pieces throughout the chain of production and distribution and results in an increase in the cost of virtually everything you buy.

Aside from raising revenue for the government, the move could have a number of things going for it, say proponents — it’s tough to evade, it’s simple by comparison to the income tax and it encourages saving.

Some conservatives have called for something similar — the so-called Fair Tax — that would replace the federal income tax system with a national retail sales tax.

But critics of the VAT say it would almost certainly not be implemented as a replacement for the income tax system — rather, it would be just another tax, on top of the income tax, the state sales tax and everything else.

“This isn’t a tax reform proposal that the White House is talking about. This is a new source of income for the government,” said Max Pappas, public policy vice president at FreedomWorks. “The government needs big taxes and we’ve got big government, so now they’re trying to decide how to pay for it.”

It’s unclear how far along the idea is on Capitol Hill.

This, of course, would violate President Obama’s pledge that 95% of Americans would see no new tax burdens. Thus, I highly doubt it would be enacted in addition to the income tax.

The White House denies it though some lawmakers and analysts have brought it up:

“That’s not something that I understand is under discussion,” White House Press Secretary Robert Gibbs said Thursday. A White House official also told the Post it’s “unlikely” to be tapped to pay for health care reform.

But Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee, was open to that idea, and the article noted that one of Budget Director Peter Orszag’s health care advisers is a VAT advocate and Paul Volcker, the former Federal Reserve chairman who’s now an Obama economic adviser, is at least willing to hear arguments.

Leonard Burman, co-director of the Tax Policy Center, wrote in a Virginia Tax Review article last month that the tax-on-everything could finance health care reform, and could reach a rate of 25 percent.

One of the chief criticisms of the consumption tax is that it is regressive — it would hurt the poor the most. Because lower-income earners use a greater percentage of their income for consumption, the tax could end up being a bigger burden on the poor.

I personally am in favor of the Fair Tax system as I believe the income tax system punishes saving, which is something we drastically need in this country. The far tax system takes the regressive aspects into account through relates and such.

However, for the federal government to implement a sales tax on top of the income tax, I believe, would cause a major tax revolt as taxes are too high as it is for the amount of money wasted everyday.