VAT's Next? Obama's Expensive Agenda Means Tax Increases All Around

By Peter Roff, Thomas Jefferson Street blog

The Democrats are not even pretending to be against tax increases anymore.

Writing in Tuesday's Wall Street Journal, former Clinton Deputy Treasury Secretary Roger Altman explains that, to pay for what Obama wants to do to healthcare in America, "we'll have to raise taxes."

Never mind the rhetoric. Never mind the reluctance. The reality is that Obama's agenda for America is so expensive that tax increases are on the table for everyone who pays taxes. And what Altman suggests is in the offing is particularly pernicious.

Altman says the economic realities created by Obama's already record deficits means that Congress, "possibly next year," will consider ways to impose a European-style Value Added Tax on a heretofore unsuspecting public. "This challenge may be the toughest one Mr. Obama faces in his first term," Altman writes. "Fortunately, the new president is enormously gifted. That's important, because it is no longer a matter of whether tax revenues must increase, but how."

At least Altman is being honest. But he underestimates the challenge. The VAT, which is French for "money machine," is quite popular in Europe because even slight adjustments in the rate produce huge revenues for the government. But to consumers this looks like price inflation rather than government action, so the political consequences are low. Of course most every government that instituted one has been thrown out of office as soon as the voters can do so, leaving behind the VAT as a lasting memorial to its time in office.

The Obama administration appears to be engaged in a sort of reverse Reaganism, at least as they interpreted Reaganism to be, with a helpful assist from former OMB Director David Stockman, who once intimated in an interview that it was his goal to force reductions in federal spending by driving up the deficit. What Obama appears to be doing is to force increases in taxes as far as the eye can see by running up a huge tab with new social spending like the cap and trade bill and nationalized healthcare—new entitlements that can only be funded by taxing all the economic activity in the United States for decades to come.

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