Reject the Value-Added Tax, Rein in Spending Instead

Brian Riedl / May 27, 2009

The Washington Post today ran an article on the possibility of lawmakers enacting a value-added tax (VAT) to pay for soaring government spending. A VAT is basically a national sales tax, and the possible 25 percent tax rate floated in the article would raise the cost of virtually all goods and services by 25 percent. It would devastate families and businesses, kill jobs, and hammer the economy.

VAT proponents take continued runaway spending for granted, leaving only the issue of how to extract the necessary tax dollars from working Americans. Nonsense. Real federal spending remained steady at $21,000 per household throughout the 1980s and 1990s, before President Bush hiked it to $25,000 per household. Now, President Obama has a proposed a budget that would permanently spend a staggering $32,000 per household annually – and that’s before all the baby boomers retire and add another $10,000 per household in Social Security, Medicare, and Medicare costs to the bottom line.

So the problem is not declining revenues, but rather a spending spree unlike any in American history. If Washington insists on spending $32,000 per household, it will have to tax $32,000 per household – an unaffordable and unfair tax burden regardless what kind of tax collects it. (more…)