With spending at nearly 25 percent of GDP and headed for more than 40 percent of national output, according to the liberal Progressive Policy Institute, how will the Democrats pay for it all?
The evidence points toward the way big-government, slow-growth Europe does it: the value added tax.
Working as a sales tax that you don’t get to see on your receipt, the VAT has proven to be a brutally efficient money machine in other countries. Maybe that’s why Speaker of the House Nancy Pelosi last month told Charlie Rose that a VAT was “on the table” as a solution to America's fiscal liabilities.
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But it’s not just “on the table.” It’s in the Senate’s health reform bill soon to be voted on.
The Senate bill’s “fee” on medical devices operates much like a VAT, and could end up being the model for future adoption of an unprecedented VAT on all goods and services in the United States.
Deep into the 2,074-page bill, on page 2,020, is “SEC. 9009,” the “Imposition of Annual Fee on Medical Device Manufacturers and Importers.” It orders that “Each covered entity engaged in the business of manufacturing or importing medical devices shall pay to the [Treasury] Secretary not later than the annual payment date of each calendar year beginning after 2009 a fee in an amount determined under subsection (b).”
The amount of tax would be based on “gross receipts from medical device sales.” Treasury bureaucrats would have the formidable power of “identification of medical devices” and the new tax would be retroactive, applying to “any medical device sales after December 31, 2008.”
Bruce Bartlett, deputy assistant secretary of the Treasury under former President George H.W. Bush, has called a VAT perhaps “the least bad way of financing needed tax reforms and the massive growth of federal health care spending that neither the [George W. Bush] White House nor Congress shows any interest in restraining.”
But in pushing for his tax reform program in 1985, President Ronald Reagan warned that “a value-added tax actually gives a government a chance to blindfold the people and grow in stature and size.”
For President Barack Obama and the Democratic Congress, a VAT may be just the blindfold needed for the Europeanization of the U.S. economy – massive government, high unemployment and a lower quality of life: a very new lifestyle for Americans.
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