Tags: republican | GOP | VAT | Tax

Daniel Mitchell: Beware as GOP Hints of VAT Tax

Wednesday, 04 Jan 2012 01:09 PM

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Republican heavyweights like Mitt Romney, House Budget Committee Director Paul Ryan and Herman Cain have hinted they'd consider looking at implementing a Value-Added Tax, or VAT tax, which levies taxes on goods along the chain of production.

While the argument goes that such a tax raises revenue without crimping income or investment, voters should view it with suspicion, says Daniel J. Mitchell, a senior fellow at the Cato Institute, a Libertarian think tank.

A VAT tax, like any tax, leads to bigger government, which would ultimately serve as a victory for the left.

"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," Mitchell writes in a Wall Street Journal column.

"Simply stated, there is no way to turn America into a European-style welfare state without this new source of revenue."

Imposing more taxes on the wealthy won't generate enough revenue to create bigger government embraced by those on the left, Mitchell argues.

"And that's why, looking at the long-run fiscal situation, the left needs a VAT. It's is the only realistic way to collect the huge amount of revenue that will be necessary to finance the mountainous benefits promised by our entitlement programs."

That's why Republicans must resist the idea.

"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," Mitchell adds.

"That's a win-win deal for politicians and a terrible deal for taxpayers."

While Mitt Romney has not officially endorsed rolling out a VAT tax, he has suggested it might be a good idea, which prompted criticism from rival Newt Gingrich's camp.

"The fact that he’s willing to look at European Socialism shows just how far out of the conservative mainstream he is," says Gingrich campaign spokesman R.C. Hammond, according to ABC News.

© 2014 Moneynews. All rights reserved.

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