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Spending Addicts, Trial Balloons, and a VAT

The Washington Examiner’s editorial today suggests that what speedballs do for drug addicts is “a lot like what Washington's political establishment is trying now to avoid admitting its spending addiction” with the value-added tax (VAT). The Examiner explains it this way:

“The political speedball would combine the quick rush of income tax increases with the euphoria induced by a value-added tax on consumption. Tax increases typically produce a revenue spurt that quickly cools off as people find creative ways to evade them, while the VAT keeps taxing consumption at every stage from production to purchase of a product. European VATs typically create substantial revenue streams, but stifle entrepreneurial energy and job creation. That's why all of Europe's welfare states are slow-growth economies. As Greece's need of a bailout to avoid bankruptcy demonstrates, political speedballs eventually produce the economic equivalent of the lethal heroin overdose that is so common among speedballing drug addicts.”

The Examiner points out that the push for “a VAT became clear this week as former Federal Reserve Board Chairman Paul Volcker, now among President Obama's chief economic advisers, hit the hustings talking up a "European-style VAT" to eliminate the government's massive and growing deficit.” This was in addition to statements by Speaker Nancy Pelosi and Fed chairman Ben Bernanke. However, the Examiner editorial correctly points out:

“That's why the fundamental problem here is not that Americans pay too little in taxes, it's that Washington politicians can't stop spending more and more of our money every year. By 2020, according to the Congressional Budget Office, federal spending will equal 90 percent of the country's gross domestic product. So our politicians clearly have no intention of checking into spending rehab. They're counting on getting that euphoria with the VAT fix. If they do, the rest of us will be left with a dead economy.” (emphasis added)

Investor’s Business Daily (IBD) also has an editorial today focusing on the VAT, and the title pretty much says it all:

“VAT Will Spell Anything But Relief”

And J.D. Foster, blogging at the Heritage Foundation's blog, The Foundry, says the "push to enact a massive tax increase in the form of a new value-added tax (VAT) is now clearly underway," concluding with:

"Today’s deficits, and tomorrow’s, result from too much spending, not too little revenue.  Reverse the massive Obama spending surge (and the Bush surge before that) and the deficits would quickly fall to sustainable levels.  Instead, Paul Volker has done the nation a great service in telling us what Obama and his congressional allies are planning.   If that is not the case, if the President and the democratic leadership in Congress really are not planning a VAT attack, let them declare their opposition to a VAT plainly.  Every current and would-be member of Congress should say where they stand on the VAT.   And unless they favor a huge government, much higher taxes, and less transparency from government, they will stand against it."


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