James Pethokoukis

Politics and policy from inside Washington

Obama and the VAT: Now it’s Pelosi’s turn

October 6, 2009

You can add House Speaker Nancy Pelosi to the group of Democrats or Obama allies (John Podesta, Paul Volcker, Roget Altman) calling for a value-added tax. (I predicted all of this days ago.) Here is Pelosi (via The Hill):

Pelosi, appearing on PBS’s “The Charlie Rose Show” asserted that “it’s fair to look at” the VAT as part of an overhaul of the nation’s tax code.

“I would say, Put everything on the table and subject it to the scrutiny that it deserves,” Pelosi told Rose when asked if the VAT has any appeal to her.

The VAT is a tax on manufacturers at each stage of production on the amount of value an additional producer adds to a product.

Pelosi argued that the VAT would level the playing field between U.S. and foreign manufacturers, the latter of which do not have pension and healthcare costs included in the price of their goods because their governments provide those services, financed by similar taxes.

“They get a tax off of that and they use that money to pay the healthcare for their own workers,” Pelosi said, using the example of auto manufacturers. “So their cars coming into our country don’t have a healthcare component cost.

“Somewhere along the way, a value-added tax plays into this. Of course, we want to take down the healthcare cost, that’s one part of it,” the Speaker added. “But in the scheme of things, I think it’s fair look at a value- added tax as well.”

Comments

Nancy Pelosi, Harry Reed and all of the other DemoRats have never seen a tax they didn’t like.

 

Obama socialism is going to cost big $$$ and big freedoms, so open your pocketbooks and adjust your expectations…here it comes.

Posted by Stacey Knight | Report as abusive
 

I heard it will be 20% on everything we buy, if they put it into law. We already have a sales tax here of almost 8%. So it would rise to 28%. I think the black market would do very well!

Posted by Barbara Tiemeier | Report as abusive
 

Pelosi has it right…the U.S. is at a competitive disadvantage by not employing a VAT. Forget, for a minute, the need to raise more revenues. Imagine a revenue neutral replacement of the corporate income tax with a VAT. No corporate taxes embedded in the price of exports. No double-taxation of dividends. No disincentive for multi-nationals to park profits abroad. U.S. becomes an investment magnet for foreign companies.

Posted by VATfan | Report as abusive
 

VATfan: HAHAHAHAHA!!! Are you KIDDING? There is NO WAY in a billion years the Democrats would EVER remove the corporate tax. What we’ll get is the 2nd highest corporate tax in the world AND a VAT tax. Do you have ANY idea how much the poor and middle class would suffer under a VAT tax?!

Posted by Eugene Hamburger | Report as abusive
 

If VAT for America would be like it is in most other countries, the VAT would REPLACE the current sales and use taxes we have, therefore the 8% you are paying would become 20% not 28%… that is of course if they do it like most countries. Also, note that it mentions a possible inclusion of health care or pension insurance in the tax, meaning “possibly” cutting other areas (like payroll maybe, dunno if that would really work). It’s hard to say what America would do with VAT since states control their own tax rates for the most part, and India’s state-controlled VAT system is so complex we might as well just stick with our current system before screwing ourselves over with an unnecessarily complicated and red-tape tax structure…. just my thoughts

Posted by KMBoom | Report as abusive
 

We need a pro-growth agenda that urges congress and the Obama administration to enact policies that bring tax rates in line with our global competitors. We need to keep chipping away at the deficit by taking steps to control wasteful government spending. See http://www.friendsoftheuschamber.com/iss ues/index.cfm?ID=104

Posted by mld | Report as abusive
 

Not sure that a VAT would replace the current sales taxes since the state or local municipalities control those SALT type taxes. More realistic likely is a broad based VAT modelled on Canadian, New Zealand, Australian laws that apply a lower rate (less than 10) and allow a sweeping variety of items (both goods and services) that are considered basic necessities to escape the tax (either through taxing them at zero percent, or by exempting them from the VAT). Such necessities include basic groceries, healthcare, education, public transportation, etc etc… The European model is complicated by the existence of 2 sets of laws, the EU law and the sub-national VAT laws in each EU member state (country), not to mention that the EU VAT rates tend to be rather high (UK 17.5 for eg).For VAT to replace other taxes as has been suggested, then a much higher rate 20, or 25% could be envisioned. The SALT taxes could be harmonized with the federal VAT in later years (as is happening in Canada and as being worked on in India).By creating a level playing field for both American exports and the vast imports, American businesses would be more competitive with their Euro / Asian counterparts and might just put the WTO out of business since most of the objections seem to be by or against the US on VAT related matters (namely b/c the US doesn’t operate a VAT).Canada provides another good example of how VAT revenue can be correctly channeled. The GST revenue in Canada as legislated goes towards the Debt Servicing and Reduction Account which services interest payments on the debt and when it can pays off the debt.http://en.wikipedia.org/wiki/Goods_ and_Services_Tax_(Canada)

Posted by PeteKL | Report as abusive
 

Many of you posters are apparently not fully aware about the mechanics of imposing a VAT (Value Added Tax) here in the USA.Basically, ALL present Federal taxes and fees, visible and hidden, will remain in place, as well as both Federal payroll taxes (Soc. Sec. and Medicare), also the IRS would still remain in-place as the U.S. Treasury’s tax enforcement bureau.The VAT is totaled-up during each phase of production and distribution of products and services, then is merely ADDED as an ADDITIONAL TAX upon all of us at the retail level; every time we all purchase goods and services we all will pay an additional 20 percent (or more) for the Value Added Tax (VAT).Let’s all phase-out our tax ignorance.Cut and Paste this into your Web browser:http://www.fairtax.org/site/Page Server?pagename=about_mainThere is a big, BIG difference between the VAT, plus keeping all those present methods of Federal taxation, instead of implementing the proposed FAIR TAX.

Posted by JuanPablo | Report as abusive
 

Politicians speak with such forked tongues. A value-added tax is “fair.” Not too long ago, before the election, I heard all the high-minded talk about how the average American was suffering at the hands of the giant mega banks, etc., and how that was going to come to an end, that absolutely no tax increases for those making less than $250,000, etc., that there would be mortgage relief, and this and that relief. So what happens? They bail out the mega banks, who turn around and raise our interest rates to 20%, cut our credit lines, refuse to loan money to average Americans, and laugh all the way to the bank to deposit their gigantic bonus checks. The mortgage companies/banks refuse to negotiate with the majority of homeowners. Meanwhile, Pelosi et al., all starry eyed, go about their pet projects of nationalizing health care, bringing in all the (third) world’s hungry masses, spending our tax money on all those organizations that they deem politically correct (ACORN, etc.), and growing the government at exponential rates (trillions), and how are they going to pay for all this? Whoops! Why, more taxes. I can barely keep my head above water with the taxes as it is. This is akin to involuntary servitude now; what is it going to become? Full out slavery? Look for Soylent Green in the not too, too distant future.

Posted by Judy Newton | Report as abusive
 

It looks like Reuters is preparing themselves to make some serious money around VAT…http://thomsonreuters.com/content/pr ess_room/tlr_taxacct/480895

Posted by Erik | Report as abusive
 

If the value added tax is seen as a way to possibly pay for health care for the uninsured, what about manufacturers who provide health insurance for their employees?

 

Actually a combination of Soylent Green, Logan’s Run(the old are expendable), Brave New World (social conditioning and population control and 1984 (doublespeak and History if Bunk). I feel like I’m trapped in Room 101.

Posted by R McGrew | Report as abusive
 

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