The Value-Added Tax Threat

One reason America is more competitive than Europe is that politicians only have access to one big source of money. But if they can add a value-added tax (a European-style national sales tax) on top of the income tax, that will allow them to finance a big expansion in the burden of government. Unfortunately, that’s exactly what they want, according to the co-chairman of President Obama’s transition team. Bloomberg reports:

“There’s going to have to be revenue in this budget,” said Podesta, Clinton’s former chief of staff and co-chairman of President Barack Obama’s transition team, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing today. A so-called consumption tax would “create a balance” with European and Japanese economies and “could potentially have a substantial effect on competitiveness,” said Podesta. Value-added taxes in Europe and Japan encourage savings by taxing consumption. Podesta said such a tax may be regressive, but can be balanced by exempting some products and using “the money to support low-wage workers.”