U.S. Sales Tax Gets New Look As A Way To Fund Health Reform And Reduce Deficits
"With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax," The Washington Post reports. The value-added tax, or VAT, is a national tax on "the transfer of goods and services that ultimately is borne by the consumer" and would "increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. The "hugely regressive" VAT is used in more than 130 countries; in industrial countries the VAT ranges "from 5 percent in Japan to 25 percent in Hungary and in parts of Scandinavia." Earlier this year, tax experts "pleaded with Treasury Secretary Timothy Geither to consider a VAT," and chairman of the Senate Budget Committee Sen. Kent Conrad (D-ND) "declared that a VAT should be part of the debate."
Although "a White House official said that a VAT is 'unlikely to be in the mix' as a means to pay for health care reform," White House Budget Director Peter Orszag "has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book Health Care, Guaranteed." Ezekiel Emanuel "argues in his book that a 10 percent VAT would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal copayments." Federal Reserve chairman Paul A. Volcker also has "expressed at least tentative support for a VAT."
Leonard Burman, "co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution," published a paper last month in the Virginia Tax Review suggesting "that a 25 percent VAT could do it all: Pay for health-care reform, balance the federal budget and exempt millions of families from the income tax while slashing the top rate to 25 percent." Smaller VAT proposals have drawn more interest, including from Volcker, but the Senate Finance Committee has "declined to include a VAT among the options it is considering to pay for health reform." Burman told the Post, ""the situation will have to get more desperate" before lawmakers are likely to consider a new levy aimed directly at the pocketbooks of every one of their constituents" (Montgomery, 5/27).This is part of the KHN Morning Briefing, a summary of health policy coverage from major news organizations. Sign up for an email subscription.