Diary

Democrats Scheming Sales Tax Proposal after Energy and Insurance

Democrats are lined up at the legislative gate with a myriad of plans to tax the working class of America. The tax targets begin with energy and insurance. Coming next will be a national sales tax, termed value-added tax or VAT.

First is the tax on energy (American Clean Energy and Security Act), which Senator Barrasso (R-WY) exposed the true cost of.

ACES will have a trivially small effect on global warming while imposing substantial costs on all American households.

Let me repeat that: a trivially small effect, while imposing substantial costs. How big are the costs? Well, he cites the Congressional Budget Office, which estimated that the resulting increases in consumer prices needed to achieve just a 15-percent reduction in carbon dioxide–slightly less than the target of this bill–would raise the cost of living $1,600 a year, every year, for every family in America. That is a $1,600 tax on every American family every year.

The Heritage Foundation predicts that the ACES approach could cost the economy $9.6 trillion and more than 1 million lost jobs into the future. And these are just the raw numbers. The real potential for economic pain goes much further.

David Sokol, chairman of MidAmerican Energy, points out that ACES–this bill–could be a bonanza. And for whom will it be a bonanza? For more Wall Street corruption and more Wall Street greed because ACES is going to deal in investment banks, it is going to deal in hedge funds and other speculators who want to speculate in the cap-and-trade market.

Next is health insurance, for which a 40% excise tax would be assessed on high end plans.

Sen. Baucus had proposed a 40% excise tax on employer-provided coverage in which premiums exceed $8,000 a year for individual coverage and $21,000 for family coverage. This would include premiums for medical, dental and vision care; employer contributions to health reimbursement arrangements and health savings accounts; and employee contributions to flexible spending accounts. The threshold amounts would increase to match rises in the Consumer Price Index for urban areas, plus one percentage point.

Alternatively, those who cannot afford insurance would be fined, or taxed, up to $1,900 per year.

The House bill calls for a penalty of a 2.5 percent additional tax on their income. The Senate Finance Committee bill would fine families up to $1,900 a year, depending on income.

Businesses would also be fined, or taxed, for not providing insurance.

In addition, employers with more than 50 employees that provide plans in which premiums paid by employees are at least 8% of their adjusted gross incomes would be hit with financial penalties, generally no greater than $400 per employee. The same penalties would apply to employers with more than 50 employees that do not offer any coverage.

A recent study, published on the same day that the $800 billion health insurance plan was introduced, suggested a tax on soda.

The group, which includes the New York City health commissioner, Thomas Farley, and Joseph W. Thompson, Arkansas surgeon general, estimates that a tax of a penny an ounce on sugary beverages would raise $14.9 billion in its first year, which could be spent on health care initiatives. The tax would apply to soft drinks, energy drinks, sports beverages and many juices and iced teas — but not sugar-free diet drinks.

The group’s review of research on the topic, appearing in The New England Journal of Medicine, was released on Wednesday, the same day that Senator Max Baucus, the Montana Democrat, made public his health care reform plan, with an estimated cost of $774 billion over 10 years. The Baucus plan would be paid for by an array of taxes and fees on high-end group insurance plans, drug and medical device makers, and other sources, with no mention of any tax on sugary beverages.

The measure would increase the cost of beverages as much as 50%.

John Sicher, the publisher of Beverage Digest, a trade publication, said that a two-liter bottle of soda sells for about $1.35. At 67.6 ounces, if the full tax was passed on to consumers, that would add 50 percent to the price. A 12-can case, which sells today for about $3.20, could rise by $1.44, a 45 percent increase.

“A one cent per ounce tax would create serious problems and potentially adversely impact sales for the American beverage industry,” Mr. Sicher said.

After this on the Democrats’ agenda is a European-style sales, or value-added tax.

John Podesta, a chief of staff in Bill Clinton’s White House, compared the nation’s budget crisis to the situation the former president faced in 1993 and said a value-added tax is “more plausible today” than ever.

“There’s going to have to be revenue in this budget,” Podesta, co-chairman of President Barack Obama’s transition team, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

A so-called consumption tax would “create a balance” with European and Japanese economies and “could potentially have a substantial effect on competitiveness,” he said. Value- added taxes in Europe and Japan encourage savings by taxing consumption.

Chris Edwards CATO