Robert Kuttner: Another Tax that Hits the Middle Class

[flpoljunkie]

Another tax that hits the middle class
By Robert Kuttner
June 30, 2010

WITH THE agreement at the Toronto G-20 summit of major nations to cut public deficits at least in half by the year 2013, we will start hearing a lot more about a value added tax . We should keep our hands on our wallets.

The goal of cutting the deficit by a set amount by 2013 is arbitrary and premature. Whether that formula makes sense depends on whether the recession is really over. Until we get a stronger economic recovery, too much deficit reduction reduces purchasing power and slows job creation.

A VAT, which is a kind of national sales tax, is especially perverse because it is a tax directly on consumers, who have already been hit hard by the recession.

But it does raise a lot of money. A VAT of 5 percent, the number usually proposed, would bring in about $250 billion a year.

In the fiscal year that begins tomorrow, the deficit will be $996 billion, according to the bipartisan Congressional Budget Office. The CBO projects that by fiscal year 2013, it will still be $525 billion. If you do the math, that means a normal recovery plus the expiration of the Bush tax cuts will cut the deficit nearly in half by 2013 with no massive new tax increases. But that hasn’t stopped the budget hawks, who want new taxes to cut the deficit even more.

VAT supporters include many members of President Obama’s own fiscal commission, which holds a rare public hearing today; the billion dollar Peter G. Peterson Foundation (which bankrolls a lot of deficit-hawkery); former Democratic Treasury Secretary Robert Rubin; and the outgoing director of the Office of Management and Budget, Peter Orszag.

more...

http://www.boston.com/bostonglobe/editorial_opinion/ope...

[SpiralHawk]

1. "Bwaaa ha ha ha ha." - Rush DraftDodger Limbaugh on behalf of Republicon Fat Cats

"Too bad about you little people (smirk). The only way out of this mess (smirk) is more, more, more tax cuts for the rich (smirk)."

- Rush DraftDodger Limbaugh on behalf of Republicon Fat Cats

[Jennicut]

2. A VAT tax is such a stupid idea. Let's kill the economy more by making it more expensive to buy

stuff. And it will be on top of the sales tax already in states, only a few states don't have one. In CT, it is 6%.

[xchrom]

3. We still have no political will beyond Reagan/Thatcherism.

There is virtually no real support for the vast majority of people

and remains true whether the politician, bi-partison commission,
blue ribbon panel - whatever it is your talking about.

There are other solutions but they will get no play.