Yet Another Brilliant Deficit-Reduction Idea

April 14th, 2010at 11:42am Posted by Eli

Because if there’s one thing we really need to do in the middle of a recession with 10% unemployment, it’s raise the cost of living…

When House Speaker Nancy Pelosi told Charlie Rose last October that a value-added tax was “on the table” as a possible way to solve the nation’s fiscal woes, the remark didn’t generate much interest. But as recent budget figures have put the depth of America’s problem into black and white, and with former Federal Reserve Chairman and White House adviser Paul Volcker nearly seconding Pelosi’s view recently, the idea of a VAT — already in use in nearly 160 countries — is gaining traction. And some progressives are sounding an alarm.

The prospect of a VAT is likely to be discussed by the fiscal commission established by President Obama. The Wall Street Journal’s opinion page has already sarcastically labeled the consortium the “VAT Commission.” At a recent event organized by the Scholars Strategy Network, a left-leaning think tank, an MIT political scientist floated the prospect of VAT as a solution to the federal revenue crunch. Volcker just last week fueled the fire even more, noting that a VAT tax was not as toxic an idea as it once had been. (Sen. Charles Grassley, R-Iowa, responded this week by coming out against the tax.) All the attention has not been welcomed by progressive groups, who worry that a VAT would unfairly burden the already-struggling working poor. “It crushes the low-income and the elderly,” said Robert McIntyre, director of Citizens for Tax Justice.

Since VAT is a tax on consumption rather than income or investments, it’s considered a regressive tax. Poor people, who tend to spend a higher percentage of their income than wealthier ones, are disproportionately affected by consumption-based taxes. In the U.S., regressive sales taxes are balanced out by a progressive income tax structure.

Yes, this is just exactly what we need to reduce the deficit.  I mean, it’s not like there’s trillions and trillions of dollars invested in financial instruments whose returns are only taxed at 15%, right?  Why should the people who actually caused the recession ever have to pay any price or feel any pain?

Entry Filed under: Economy,Politics,Wankers

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