Obama's National Sales Tax

President Obama is vetting a new national sales tax (commonly referred to as a VAT) to extract more wealth from the private sector to sustain his insatiable hunger for more government spending.  Former Fed Chairman Paul Volcker and current Fed Chairman Ben Bernanke have commenced a vetting strategy to convince Americans that they need to give more and more money to an every-expanding and bloated federal government.  Congress needs to just say no to a VAT — and increased taxation — as part of any pitch by this Administration to balance the budget.

Volker and Bernanke have used a two pronged strategy to vet the VAT.  First is fear mongering.  Bernanke argues that Americans need to choose between higher taxes or massive cuts in critical government programs.  He mentioned Social Security, Medicare, Education and Defense as areas of government spending that would be targeted if we don’t raise taxes. This is a false choice.  The federal government needs to reform entitlement programs, needs to root out waste fraud and abuse and should eliminate programs like the National Endowment for the Arts.

The deficit incurred by the federal government has reached about $12.8 trillion and next year’s projected deficit is record breaking at $1.6 trillion.  Obama’s solution?  Not cutting government, not ending bailouts, not entitlement reform, and not stopping the Stimulus.  Instead, Federal Reserve Chairman Ben Bernanke yesterday commenced a debate on higher taxes yesterday, see the Washington Post:

To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.

White House economic advisor Paul Volcker, and former Chairman of the Fed, urged the United States to follow Europe and impose a Value Added Tax (VAT).  The Washington Examiner has this description of a VAT:

A VAT is a national sales tax that would be collected by retailers. But it can also be imposed on products as they make their way through the manufacturing process. That is, the tax for a single product is paid by manufacturers, producers, and business that add value to the product, as well as by the consumers. Critics argue that the VAT is a regressive tax that unduly places the burden on the poor.

The reason why elites in Washington would look to a VAT before increasing income taxes (and, believe me, higher income taxes are coming) is because not enough of the population even pays income taxes to make it worthwhile for the government to use the income tax structure to balance the budget.  According to the Tax Policy Center, only about 47 percent of Americans will pay no federal income taxes at all for 2009.  Meanwhile, the government can extract the most amount of your wealth from a national sales tax (VAT) and Volker’s statement yesterday evidences a will on the part of this Administration to start the fear mongering process to tee up higher taxes.

Don’t be fooled by the rhetoric on the part of the agents of President Obama when they try to downplay the effort to impose higher taxes on all Americans.  Volker and Bernanke would not be messaging for higher taxes if this Administration did not want them to.  A VAT, national sales tax, would be the end of economic freedom as we know it, because the federal government would then have the power to tax all aspects of our lives.  Until Washington can restrain spending, we should not entrust it with the power to create a brand new tax.