Taxes & Spending

Voters Do Not Want the VAT

As the Obama Administration continues to float the possibility of enacting a Value Added Tax (VAT) as a solution to the growing deficit problem, polls show that such a national sales tax is widely unpopular with the American people.

According to a Rasmussen poll, 60% of likely voters are against a VAT if it is simply a way to raise revenue for the government, with only 20% favoring a VAT to raise money for Uncle Sam.

If the VAT is used to pay specifically for healthcare, the numbers improve swith 51% of voters nationwide still opposing a national sales tax and 37% favoring the implementation of a VAT to pay for healthcare, said the poll from March 30.

The Senate also recently went on record opposing the VAT in a nonbinding “sense of the Senate” resolution.

The Senate voted 85-13 in favor of the resolution, which says that the VAT is “a massive tax increase that will cripple families on fixed income and only further push back America’s economic recovery.”

Sen. John McCain (R.-Ariz.), who sponsored the resolution, said on the Senate floor: “The solution to America’s worsening government fiscal outlook is not to increase taxes, it is to cut spending. Congress could get America’s economy back on track by focusing on tax relief and simplification, liability reform, regulatory reform, health care security and energy independence, not on imposing a new massive tax increase that will cripple middle- and low-income families and delay America’s economic recovery.”

Speculation about the possible implementation of a VAT has increased in recent weeks, first with White House economic advisor Paul Volcker suggesting a VAT on April 6, followed by President Obama leaving open the possibility of such a tax on an interview with CNBC last week.

Volcker suggested that a VAT could be an effective way to help control the rising deficit, but the Obama Administration backed away from his comments and said that a VAT was “not under consideration.”

However, Obama would not leave out the possibility of a VAT becoming reality. In his April 21 appearance on CNBC, he said: “I want to get a better picture of what our options are,” he said after noting that the VAT has been effective for some countries.

On Sunday, the co-chair of Obama’s debt commission, former Sen. Alan Simpson (R.-Wyo.), told Fox News that President Obama instructed him to have everything on the table—to consider anything that could be done to reduce the federal deficit.

This would include new taxes, including the value added tax.

“I think there are many good arguments that you can make for a value added tax or a consumption tax, as opposed to a tax on wages,” Simpson told Fox News. However, he also addressed having both the income tax and the VAT.

“You can’t have a VAT tax, and then leave the present [income tax] structure,” Simpson noted.

The commission, led by Simpson and former Clinton White House Chief of Staff Erskine Bowles, held its first meeting Monday. The commission includes six members appointed by the White House and 12 lawmakers appointed by congressional leadership of each party. At least two congressional Republicans would have to sign on to any proposal in order for the commission to adopt it.

Last Thursday, Vice-President Joe Biden then told ABC’s “The View” that Obama “said he was open to listening,” and “has said everything’s on the table.” However, White House Press Secretary Robert Gibbs than deflated the whole speculation on Thursday. “Just to be clear, no VAT tax,” he told reporters on Air Force One.

According to the March 30 Rasmussen poll, 60% of voters believe that tax increases harm the economy.

However, voters are much more supportive of the VAT if it will be used in place of the national income tax. 47% of voters support the use of the VAT in place of the income tax, and only 30% are opposed to the idea.

The Heritage Foundation describes the VAT, already used in the European Union, as “similar to a national retail sales tax but is collected at every stage of business production until its entire burden ultimately falls on the consumer.”

Former Sen. Pete DuPont (R.-Del.) wrote in the Wall Street Journal about the impact the VAT has had on European economies.

“The VAT has been in use in the European countries since the late 1960s, and has had a strong, negative economic influence.” DuPont said. “Before the European VATs were put into effect, the average EU tax burden was 28% of gross domestic product, compared with the 25% in the U.S. By 2006 with the VATs EU average tax burden was 40% compared with 28% in America.”

DuPont continued: “Average European government spending was about 30% of GDP when the VATs were instituted in the late 1960s. Fast forward to today, and we see European government spending has grown more than 50% and now hits 47% of GDP. And European government debt in 2005 was 50% of GDP, compared with under 40% in America.”

Imposing a VAT on America would violate Obama’s campaign promise that no family making less than $250,000 per year would see “any form of tax increase.”

Americans for Tax Reform said, “Obama’s VAT admission may explain his recent attempts to alter the terms of his central campaign promise. Twice in the past two weeks, Obama has claimed his middle-class tax pledge only applied to income taxes rather than ‘any form of taxes.’”

In his April 10, weekly radio address, Obama said: “And one thing we have not done is raise income taxes on families making less than $250,000. That’s another promise we’ve kept.”

During the presidential campaign, Obama said: “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

Sign Up