White House: Obama Not Proposing or Considering Value Added Tax
April 19, 2010 - 6:00 PMPresident Barack Obama is not considering proposing a value added tax (VAT), White House Press Secretary Robert Gibbs asserted Monday.
“This is not something the president has proposed, nor is it under consideration,” Gibbs told reporters Monday.
With a VAT, products and services are taxed at every step of production whenever value is added to them, such as when rubber is processed and then turned into a tire, and so on down the line to the tire store where it is sold to the customer.
“The advantage of this kind of tax, from the standpoint of the officials who impose it, is that the total amount that the taxes add to the final price paid by the consumer is not apparent, as it is with a sales tax, for example,” reported economist Thomas Sowell.
“In general, the less visible a tax is, the more revenue can be collected without resistance or electoral retribution by the voters,” and many European countries use a value-added tax as “a major source of revenues,” Sowell added.
Obama’s economic advisor Paul Volcker, former chairman of the Federal Reserve, suggested in early April that the VAT should be on the table and “was not as toxic an idea” as it had been in the past.
This comes after The New York Times “Caucus blog” reported Sunday that, “since any Social Security plan would probably preserve benefits for those nearing retirement, it would not help the administration achieve its goal of reducing the deficit to 3 percent of gross domestic product, from 10 percent, within a decade.”
“One way to reach that 3 percent goal, by the calculations of Mr. Obama’s economic team: a 5 percent value-added tax, which would generate enough revenue to simultaneously permit the reduction in corporate tax rates Republicans favor,” the Times reported.
In his weekly radio address on April 10, President Obama seemed to hedge on his campaign pledge not to raise any taxes on people earning less than $250,000, by addressing only “income” taxes.
“And one thing we have not done is raise income taxes on families making less than $250,000,” Obama said. “That’s another promise we’ve kept.”
As a candidate during a Sept. 12, 2008 campaign rally in Dover, N.H, Obama said: “And I can make a firm pledge: Under my plan, no family making less than $250,000 will see their taxes increase—not your income taxes, not your payroll taxes, not your capital gains taxes, not any of your taxes.”
Obama’s budget proposal for fiscal year 2011 creates a deficit of $3.8 trillion. Meanwhile, the national debt is projected to climb to $20.3 trillion by 2020, nearly 90 percent of Gross Domestic Product, according to the Congressional Budget Office.
Other Democratic leaders who have suggested implementing a VAT on top of all other existing taxes include House Speaker Nancy Pelosi (D-Calif.) and Sen. Kent Conrad (D-N.D.), as well as White House adviser Ezekiel Emanuel and Obama transition team leader John Podesta, who heads the liberal Center for American Progress.