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Less Than 48 Hours After The Election: Is a 'VAT' Tax a Possibility? [2nd Update]

Alexa's picture

Grand Bargain Watch - Save Social Security
Grand Bargain Watch -- Save Social Security
DonkeyHotey's photostream, flickr

I just finished listening to a live discussion about "The Lame Duck Session and the New Congress," hosted by CQ Roll Call's Mort Kondracke, with Thomas Mann (Brookings) and Norman Ornstein (AEI).

Norman Ornstein indicated that "serious discussion is being given to a dedicated consumption (VAT) tax for Medicare and Medicaid." If enacted, this would replace part of the heavy cuts to the marginal tax cuts for the wealthy (my words). Their words--"to replace part of the income tax").

The VAT tax will be for "things we don't want to encourage," according to Thomas Mann.

Ornstein believes that President Obama will embrace a deficit reduction plan within the week. Both gentlemen also believe that President Obama will defer to the Senate, Business Leaders, and Erskine Bowles and Alan Simpson to actually produce the plan.

The package will contain 4 Trillion in deficit reduction.

1 to 1.3 Trillion from revenue increases. "The rest" from defense and entitlement cuts.

They believe that along with the "Gang of Eight" and the "Gang of Forty" (senators), "the Udalls" and John Kerry will lead the Democrats. Coburn will lead the Republicans.

Ornstein says that if a VAT tax is proposed, it would be made part of the "framework" to be passed, probably in the lame duck session "under the cover of tax reform."

I'm truly not trying to be hyperbolic, but it appears to me that our entire social safety net and tax system, is "being remade" right before our eyes.

Bowles-Simpson would impose substantial increases in income taxes for low- and middle-income Americans by "broadening the base," at a time of draconian cuts to the social safety net. Couple that with mandatory health insurance, and a possible VAT tax in the making for the near future, I'd say that it's time for progressives to find their voices.

I don't know the answer, but somehow we need to wake up the liberal community, and find a way to "mainstream" all of this information. And more importantly, we need to support demonstrations against these draconian policies, hopefully in addition to, and broader than the OWS movement.

Raising revenue may be necessary, but allowing the Bush tax cuts to expire, would be the right way to go about it, since most of the cuts were to the wealthiest Americans, not the poor, or lower- and middle-income Americans.

“If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” — Woodrow Wilson

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Submitted by YesMaybe on

It might well be that this is what they'll end up agreeing on in a closed-room deal. Or it could be something else that they'll agree on in a closed-room deal. Either way, this kind of leak/speculation can't be taken to be very reliable. It could be a trial balloon, a head fake, or one side trying to influence the negotiations through false leaks, no way to know. Of course, once they announce the actual deal, whatever it is, they'll present it at as a fait accompli. It's just how they roll. Naturally, Obama supporters will accept it as due to evil Sith Lord Boehner, and as the best that could've been hoped for given the circumstances.

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Submitted by Alexa on

and Bill Clinton endorsed it at one of Pete Peterson's shindigs (on tape). It's been endorsed by Dick Gephardt, Alice Rivlin, Bill Bradley, etc.

And I have to wonder if the PtB don't figure that nowis the opportune time to move on this.

Eventually, the masses will realize how much they've been "scr**wed. And the PtB know that.

So, my theory is that they'll attempt to "do as much as possible" before people catch on, and resistance builds.

And as Ornstein conceded, once they drop the marginal tax rates as low as Bowles-Simpson proposes, we'll have to have another revenue stream.

We know that they rarely raise marginal tax rates, once they've been lowered. So something like a VAT tax or a carbon tax, etc., would be the only feasible option. [But, I've been wrong before. LOL!]

Regardless, I believe that a VAT tax is in our relatively near future. Time will tell . . .

Alexa's picture
Submitted by Alexa on

of "selling a VAT tax" in such a short period of time.

Bothl sides seem to agree that tax reform must be finished by July 2013. So, it may have to be deferred this year, if the PtB's propanganda machine isn't up to the task of brainwashing "the American people" in such a short time frame. ;)

Submitted by YesMaybe on

I'm not saying it's unlikely to happen. Or even that it's unlikely to happen very soon (in the lame duck session). Just that rumors are still rumors, even if they're credible and even if they turn out to be true. And I'm not saying nothing should be done in terms of protesting until the official plan is out, either. (Though I'm pretty sure nothing will be done on a large enough scale to sway congress or Obama--the majority of those who consider themselves liberals are Obama supporters, and they are (a) politically spent from the election season and basking in a post-coital glow, and (b) not going to go against Obama anyway.) But I think any protests--at least until official word comes from Obama, Boehner, et al.--would do best to focus on long-standing goals (e.g. cutting the military industrial complex, not cutting SS and medicare, social justice, etc.) rather than reacting to the latest rumors.

jumpjet's picture
Submitted by jumpjet on

a carbon tax. But maybe Obama will sweeten the deal with deeper cuts to Social Security, eh?

We do need a carbon tax, for the sake of the planet and our future energy security. But I don't want it to come about like this.

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Submitted by letsgetitdone on

to hit hard on the "fiscal cliff" BS. However, I don't think the VAT's in the cards. Too many will attack it for its regressivity, and it wasn't in the BS framework, in the first place.

The hawks too k a hit last week when the study of the CBO stuff on rising Medical Costs pretty much blasted the CBO projections out of the water!

Submitted by lambert on

... and every faction and think tank is rushing forward with its "solution." The VAT is just one of them, probably IMNSHO a non-starter, even if it does screw the right people.

UPDATE Adding, the term of art is "trial balloon." I think that's the right framing -- and has the merit of being true -- but I think there is great value in tracking these as they are floated, and who is doing the floating (with quotes). So thanks to Alexa for doing this -- and a "?" after a headline can go a long way.....

Alexa's picture
Submitted by Alexa on

insert 'possibly" in the title (along with the question mark).

I did use the exact wording of the speakers (I wrote it down as they spoke). But I could add a clarification of the exact speaker, in the first sentence, and a phrase for clarification in the second sentence.

Ornstein and Mann indicate that "serious discussion is being given to a dedicated consumption (VAT) tax for Medicare and Medicaid." [Ornstein said this.]

Ornstein says the VAT tax would be made part of the "framework" to be passed, probably in the lame duck session, under the cover of tax reform. [Operative words here that I will clarify in post, if a VAT tax proposal was adopted, "it would be part of the framework . . . " I will add that phrase, as well.]

And, in my own words, I did clarify by inserting (possibly) in the following sentence " . . . mandatory health insurance is upon us, and it appears that a "VAT tax" is (possibly) in the making for the near future." So I'll just let it stand, as is (unless there's an objection to that).

I'll take care of this shortly. Please let me know if further clarification, etc., is needed. And thanks.

Alexa's picture
Submitted by Alexa on

President Obama's delivering a major speech on the fiscal cliff, and "growing the economy" at 1:00 EST tomorrow. That may give us a clue. [Actually, I doubt it. Just like with the Super Committee, I suspect that we'll not hear any specifics until a proposal hits the floor for a vote. That was definitely what the Super Committee intended to do.]

I'll check out the USA Today piece as soon as I post a couple of pieces here. I know that you, Lambert and 'Lets' think I'm way off base on the "VAT," so I thought that I'd post a couple of articles that actually show some pretty major support. Pelosi, for one. Hope you'll check them out.

BTW, I'm not sure that I believe that it would actually come into fruition this round of tax reform. But I don't believe that Obama will leave office without trying to enact a consumption tax (unless Republicans stand in the way). And I don't think that will happen, because they have to know that when they lower the marginal tax rates as low as Bowles-Simpson proposes, money will have to come from somewhere. And they would rather raise taxes this way, than to tax the wealthy.

Heck, I saw US House Representative Chaka Fattah (PA) on Washington Journal just months ago, trying to sell the idea. And politicians often have these "think tank" guys lead the conversation--to give them cover. But, we'll see. It will be interesting for sure.

Here's a couple of links:

Pelosi Says New Tax Is On -The-Table, The Hill, 10/06/09.

VAT--Will The US Adopt A Value-Added Tax?, CBS Money Watch, April 7, 2010.

Here's an excerpt which is more in keeping with what you guys all think:

"The case for a VAT is simple: The U.S. government's fiscal gap is widening by the hour. The deficit for 2009 alone was a cool $1.4 trillion, and it's projected to hit $1.6 trillion this year. By the end of the year, the Office of Management and Budget says the gross federal debt will stand at $13.8 trillion. As Bruce Bartlett, a former Reagan economic advisor who supports a VAT, puts it, "The U.S. needs a money machine." A VAT, because it touches every transaction, is just that: The Congressional Research Service estimates that each one percent of a value-added tax would raise $50 billion. That's real money.

To be sure, no one expects a VAT to join the tax code this year or next. But what about by 2020? The odds narrow sharply. "There's very little chance in the next few years," says Brian Harris, a senior research associate at Brookings, a left-of-center think tank, "but a substantial chance in the next decade or so." And Ryan Ellis, tax policy director at the right-of-center Americans for Tax Reform, who loathes the idea, says of the VAT, "I think it's coming, in the next five to 10 years certainly."

Submitted by YesMaybe on

I'm certainly not well-informed enough to form an opinion about what kind of 'tax reform' the republicrats have in mind. So I'll definitely be curious to see these. I was talking more about the medium (rumors/speculation about what is being discussed) than the content.

As for Obama, I'm not expecting anything new in his speech. Just the usual fluff about how the American people want them to take care of things, not kick the can, about how everyone should pay their fair share and play by the same rules, etc. I'll read the transcript, though (I hate listening to their speeches).

Submitted by lambert on

But I don't see VAT as part of the Grand Bargain/Great Betrayal.

One attractive thing about the VAT (attractive not from our standpoint) is that it looks a lot like just another rent, and it goes very well with electronic transations, national ID and so forth.

Heck, they could privatize it!

UPDATE Adding, I took out the excess italics. Quotes don't need to be in italics. The block quote is enough. In a long form block, the minimalist formatting is best....

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Submitted by Alexa on

Apparently, the catalyst for serious discussion of a "VAT" tax is the so-called "Gang of 40" (senators). I know that I was not familiar with that group.

Now I know why. They have formed since, and are working with the Pete Peterson group, the "Campaign to Fix the Debt Campaign" formed in July.

THEY are the ones who are "seriously discussing" including a VAT in the "framework" package. That figures.

Ornstein and Mann believe that President Obama will make a dramatic public appeal with Bowles, Simpson, Tom Coburn and various other lawmakers, Jamie Dimon and Jeff Immelt (along with other business leaders) by his side.

Can you believe that? I can't wait to see what the likes of Ed Schultz and other so-called progressive talking heads say to that.

Didn't progressives scream and holler, demanding Jamie Dimon's head at one time? (Maybe I'm confused, since it's been a while.) At any rate, to have a "bankster" like him at his side seems counterintuitive if he wants "his base" to go along with Bowles-Simpson.

They also will "localize" selling the Grand Bargain, by trying to convince constituents in each district that this reform will create jobs.

Jeeeeezzzz. This is getting stranger, every day.

Submitted by lambert on

And the whole public appeal thing? I can't find it. This may be moving faster than I thought, ugh. (Pelosi was 200r or was it 2010, this is more reason).

Is there a transcript for the CQ thing?

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Submitted by Alexa on

Bargain, by trying to convince constituents in each district that this reform will create jobs."

That comment was made by a reporter earlier today (not part of the Ornstein and Mann discussion). I've had C-Span radio on all day.

Honestly, don't know what program or panel was playing, when that comment was made (about "localizing" selling the Grand Bargain). Sorry.

Submitted by jawbone on

I have very little time to read stuff, but was trying tocatch the Update. Couldn't discern from skimming where the new info/Update is in the post.

Time of update? Where? Maybe a title? Thank!

Gotta run to get things faxed.

Alexa's picture
Submitted by Alexa on


I was referring to the addition of transcripts.

Revision 1--was the excerpt from President Obama's speech. [I first just posted a couple of links, without comment, etc.]

Revision 2--was the inclusion of the tentative Grand Bargain from Matt Bai's piece.

But your point is well-taken.

The next time I indicate that there's been a revision, I will clearly indicate what the revision is.

Probably by inserting ********* (unless Lambert knows a more formal, or correct way to do so).

Submitted by lambert on

For corrections at the sub-paragraph level I just added a strikethrough button S. Just like B, select text, press button. So perhaps like this:

Old text new text

Or obsessively:

Old text new text [2012-11-06 6:55PM

For major paragraph corrections at the replacement level as oppose to the tweak level, I'd suggest a whole new paragraph, placed at the bottom of the post, preceded by the word "UPDATE" (and if need be time stamped as above. Then you can weave something like "But see UPDATE below" into the existing paragraph. (Remember that people will have already read the old para, it will have been Googled, so it's best just to leave it as is in the flow...)

Alexa's picture
Submitted by Alexa on

And for the Twitter ones.

I think that I'll have to pass on the Facebook stuff. But maybe some of the folks here won't mind "facebooking" some of the blogs from their accounts.

Just saw the chat room messages from you, twig and katiebird.

I apologize. Guess I didn't have that system activated. [Didn't even notice it.]

Anyway, as I told them, I've taken care of that. Hopefully, they'll resend them.