Daniel J. Mitchell sends up the red flag in "Will Republicans Hand the Left a VAT Victory?"
In a recent interview on these pages, presidential candidate Mitt Romney refused to rule out a value-added tax (VAT). He suggested that this hidden form of a national sales tax—which is embedded in the prices of goods and services during the production process—might be appropriate, particularly as a way of financing other tax cuts.The fear many of us harbor is a contest next November between a man who is committed to raising taxes and a man who sounds like he's prepared to raise taxes. (You can decide which is which, if there's really a distinction.) At a time when business is fleeing our shores for more competitive environs, a new tax - whether on consumers or on providers of goods and services - will spell disaster.
What's going on here?
The most important thing to realize is that many people in Washington want bigger government, and a VAT is a necessary condition for that to happen. Simply stated, there is no way to turn America into a European-style welfare state without this new source of revenue.
Unsurprisingly, President Obama is favorably inclined toward a VAT, having recently claimed that it is "something that has worked for other countries." And yet it's unlikely that the president would propose a VAT, in large part because he is fixated on class-warfare tax hikes. If he did, almost every Republican in Congress would be opposed, even if only for partisan reasons.
But what if a VAT sympathizer like Mr. Romney wins next November and decides that his plan for a lower corporate tax rate is only possible if accompanied by a VAT? There will be quite a few Republicans who like that idea because they want to do something nice for their lobbyist friends in the business community. And there will be many Democrats drawn to the plan because they realize that they need this new source of revenue to enable bigger government. That's a win-win deal for politicians and a terrible deal for taxpayers.
But it'll be great for sustaining phenomenal government growth.
I don't feel good about this. Not at all.