The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.

Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax "was not as toxic an idea" as it has been in the past and also said a carbon or other energy-related tax may become necessary.

Though he acknowledged that both were still unpopular ideas, he said getting entitlement costs and the U.S. budget deficit under control may require such moves.

"If at the end of the day we need to raise taxes, we should raise taxes," he said.

The U.S. budget deficit is expected to reach $1.5 trillion in fiscal year 2010.

Volcker said that the strained fiscal situation in the U.S. will test the U.S. dollar eventually, which has lately been insulated by even greater stress facing other currencies.

For now, he said U.S. inflation remains low but urged against raising the central bank's inflation target to stimulate growth, saying "nothing could be nuttier."

Volcker's tenure atop the Fed came during a period of higher inflation, which he tamed by hiking interest rates to 20 percent.