Bankrupting the Common People

Dick Armey: Democrats Will Impose Value-added Tax on Top of All Other Taxes

April 22, 2010

CNSNews - Economist and former House Majority Leader Dick Armey (R-Texas) said he “always believed” the Democrats would impose a value added tax (VAT) on top of all existing, current taxes when they took control of the House, Senate and White House. Armey described the VAT as the most “insidious tax of all.”

In an exclusive interview with Armey on Capitol Hill, CNSNews.com asked: “Paul Volcker, a senior economic adviser to President Obama, and several members of Congress, including Speaker Pelosi, have floated the idea of the VAT tax being implemented on top of current taxes. Would you support something like that? Why or why not?”

Armey said: “Absolutely not. Look, in 1994, I studied – actually, starting in the fall of ’93 – I studied all tax options out there, and I, of course, settled on the flat tax as the best option for a lot of reasons. The Value Added Tax was always the most insidious tax of all, and I always saw that – I’d seen that back in ’77.”

“But, I always believed that when the Democrats got the majority in both the House and the Senate – and I’ve told this to people for years – when they get the House and the Senate and the White House, they’re going to add a Value Added Tax to the existing income tax,” said Armey.

“It’s not going to be a VAT instead of – it’s in addition to, and, of course, they are doing exactly what I predicted. Why? Because they’ve got gluttonous spending habits, and they want to spend more, and they need to raise money to do it, and they can’t raise the money out in front of God and everybody for the taxpayer to recognize what they’re doing,” he said.

“So they are looking at that best instrument to hide the tax from the taxpayer. And that’s why the VAT tax is attractive. The VAT tax has never been attractive to anybody except tax leviers,” Armey added.

The VAT is a general sales tax added to the price of goods and services at each step of production whenever value is added to those goods and services. According to the Tax Policy Center, the VAT was first imposed by France in 1948 and then by the European Community (EC) in 1968. To date, over 100 countries impose some form of a VAT except Australia and the United States.

Economist and best-selling author Thomas Sowell said that the advantage of a VAT, “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. In general, the less visible a tax is, the more revenue can be collected without resistance or electoral retribution by the voters.”

Many European countries use a value-added tax as “a major source of revenues,” said Sowell.

Paul Volker has said the value-added tax "was not as toxic an idea" as it has been in the past.

"If, at the end of the day, we need to raise taxes, we should raise taxes," he said.

House Speaker Nancy Pelosi (D-Calif.) told the “Charlie Rose Show” in October 2009:

“Somewhere along the way, a value-added tax plays into this. Of course, we want to take down the health-care cost, that’s one part of it. But in the scheme of things, I think it’s fair to look at a value-added tax as well.”

Armey said the “flat tax” is the most honest tax.

“The first thing about a VAT is it’s not honest,” Armey told CNSNews.com. “It’s a dishonest effort to pick your pocket and disguise it from you. The straight income tax gives you a clear picture of what your tax liability is and what your neighbor’s tax liability is, and then you need to get rid of the corruptions that are in the tax code.

“The two great corruptions in the tax code are, one, the desire to redistribute income and, two, the desire to do such things as social engineering,” he said. “Get rid of that garbage. It’s not their job.”

Armey also said the Democrats will pass the VAT by arguing that it’s “an emergency.”

“Well, what they do is they pass the VAT, the Value Added Tax saying it’s an emergency – it’s necessary,” said Armey. “They pass it at a low level. Once they get it in place, they hide it, and the perception of the public, if they perceive it at all is, ‘Well, it’s only falling on the business people. Real people aren’t paying taxes.’

“What happened in England is they got the VAT, they got it as a gentle, minimal tax, and people thought that’s not very harmful,” he said, “but pretty soon it’s growing like a weed.”

White House Press Secretary Robert Gibbs said on Monday that the White House is not considering a Value Added Tax (VAT), but on Wednesday, when pressed by reporters, he would not say that the Obama administration is ruling out the idea.

Obama Suggests Value-added Tax May Be an Option

April 21, 2010

AP – President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days.

Before deciding what revenue options are best for dealing with the deficit and the economy, Obama said in an interview with CNBC:

"I want to get a better picture of what our options are."

After Obama adviser Paul Volcker recently raised the prospect of a value-added tax, or VAT, the Senate voted 85-13 last week for a nonbinding "sense of the Senate" resolution that calls the such a tax "a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery."

For days, White House spokesmen have said the president has not proposed and is not considering a VAT.

"I think I directly answered this the other day by saying that it wasn't something that the president had under consideration," White House press secretary Robert Gibbs told reporters shortly before Obama spoke with CNBC.

After the interview, White House deputy communications director Jen Psaki said nothing has changed and the White House is "not considering" a VAT.

Many European countries impose a VAT, which taxes the value that is added at each stage of production of certain commodities. It could apply, for instance, to raw products delivered to a mill, the mill's production work and so on up the line to the retailer.

In the CNBC interview, Obama said he was waiting for recommendations from a bipartisan fiscal advisory commission on ways to tackle the deficit and other problems.

When asked if he could see a potential VAT in this nation, the president said:

"I know that there's been a lot of talk around town lately about the value-added tax. That is something that has worked for some countries. It's something that would be novel for the United States."

"And before, you know, I start saying 'this makes sense or that makes sense,' I want to get a better picture of what our options are," Obama said.

He said his first priority "is to figure out how can we reduce wasteful spending so that, you know, we have a baseline of the core services that we need and the government should provide. And then we decide how do we pay for that."

Volcker has said taxes might have to be raised to slow the deficit's growth. He said a value-added tax "was not as toxic an idea" as it had been in the past.

Since then, some GOP lawmakers and conservative commentators have said the Obama administration is edging toward a VAT.

U.S. May Need National Sales Tax to Cut Deficit: Volcker

April 7, 2010

Reuters with CNBC.com - US lawmakers will have to make some tough choices in the coming years to bring U.S. deficits under control, including possibly introducing a national sales tax, White House economic adviser Paul Volcker said on Tuesday.

While highly unpopular, Volker said the U.S. should consider a European-style national sales tax, also known as a value-added tax, and perhaps an energy or carbon tax.

The value-added tax "was not as toxic an idea" as it has been in the past, the former Federal Reserve chairman told the New York Historical Society. Adding it may be necessary to fund entitlement costs and decrease U.S. deficits.

"If at the end of the day we need to raise taxes, we should raise taxes," he said.

The U.S. budget deficit is expected to reach $1.5 trillion in fiscal year 2010.

Volcker said that the strained fiscal situation in the U.S. will test the U.S. dollar eventually, which has lately been insulated by even greater stress facing other currencies.

For now, he said U.S. inflation remains low but urged against raising the central bank's inflation target to stimulate growth, saying "nothing could be nuttier."

Volcker's tenure atop the Fed came during a period of higher inflation, which he tamed by hiking interest rates to 20 percent.

Volcker also said the chances of enacting financial reform this year are getting better and should include some type of ban on proprietary trading by banks.

Volcker, who crafted a proposed ban on proprietary trading by banks, said he thinks a bill could be ready for President Obama's signature shortly before or after the Congressional recess in August.

"The prospects are getting better and better," he said.

Obama surprised financial markets when he proposed a ban on proprietary trading in January. Dubbed "the Volcker rule," it also would ban banks from the hedge fund business and limit their future growth.

Volcker said he hopes some form of proprietary trading ban is included in a final bill, which the White House has urged Congress to pass in order to tighten bank and capital market oversight after the financial crisis.

While not central to the recent crisis, he added that "I don't want (proprietary trading) to be the focus of the next crisis." The U.S. House of Representatives passed a financial reform bill last year that does not include an explicit ban, while a Senate version also lacks an outright ban on proprietary trading but instead instructs regulators to study the issue.

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he hopes to have full Senate approval within a month, at which time the two chambers would have to reconcile their versions of the bill.

A White House spokesman said in late March that Obama wants financial reform legislation in place by September, the two-year anniversary of the 2008 Wall Street crisis.