Will Americans Ever Pay a National Sales Tax?
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With President Obama's drastic health-care overhaul looming, and an expected $1.8 trillion deficit this year, U.S. regulators are being forced to look at a policy which was once considered political suicide -- a value-added tax (VAT), commonly referred to as a national sales tax.
Compared to the U.S.'s current tax structure, a VAT is almost on the complete opposite side of the tax spectrum: rather than taxing earnings, as the current income tax does, a VAT would tax consumption, causing sharp price increases on everything from toothpaste to automobiles. While national sales taxes are used in 130 countries around the world (ranging from 5% in Japan to 25% in Hungary), U.S. policy makers have long feared even proposing such an idea as constituents often focus on short-term consequences rather than long-term benefits.
But with deficits expected to surpass more than $4.5 trillion over the next 4 years, the time to take a long, hard look into the future may be here. Advocates suggest that a U.S. VAT would be just the thing to corral a completely new source of government revenue. One supporter, cited in a Washington Post article, believes a 10% VAT "would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal copayments." Going further, another proponent indicated that a 25% national sales tax would pay for all of Obama's health-care reform, balance the U.S.'s budget and also exempt millions of citizens from the income tax.
On the other hand, opponents of the VAT point out that the initiative is highly regressive and would instantly lift prices on everything American's consume. Moreover, rivals contend that while such a tax is used worldwide, deficits in these countries often do not come down.
While top officials have said that a VAT is "unlikely to be in the mix" of consideration to pay for Obama's health-care plan, the mere fact that the topic is even being addressed could suggest Americans are finally beginning to grow concerned with massive government debt.
Compared to the U.S.'s current tax structure, a VAT is almost on the complete opposite side of the tax spectrum: rather than taxing earnings, as the current income tax does, a VAT would tax consumption, causing sharp price increases on everything from toothpaste to automobiles. While national sales taxes are used in 130 countries around the world (ranging from 5% in Japan to 25% in Hungary), U.S. policy makers have long feared even proposing such an idea as constituents often focus on short-term consequences rather than long-term benefits.
But with deficits expected to surpass more than $4.5 trillion over the next 4 years, the time to take a long, hard look into the future may be here. Advocates suggest that a U.S. VAT would be just the thing to corral a completely new source of government revenue. One supporter, cited in a Washington Post article, believes a 10% VAT "would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal copayments." Going further, another proponent indicated that a 25% national sales tax would pay for all of Obama's health-care reform, balance the U.S.'s budget and also exempt millions of citizens from the income tax.
On the other hand, opponents of the VAT point out that the initiative is highly regressive and would instantly lift prices on everything American's consume. Moreover, rivals contend that while such a tax is used worldwide, deficits in these countries often do not come down.
While top officials have said that a VAT is "unlikely to be in the mix" of consideration to pay for Obama's health-care plan, the mere fact that the topic is even being addressed could suggest Americans are finally beginning to grow concerned with massive government debt.
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