Research Briefing

Obama’s Solution For Funding His Binge Spending: National Sales Tax And National Energy Tax

OBAMA ECONOMIC ADVISOR SAYS NATIONAL SALES TAX, NATIONAL ENERGY TAX NEEDED TO PAY FOR  BINGE SPENDING. “Volcker … 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.” (Steve C. Johnson & Leah Schnurr, “Volcker Taxes Likely To Rise Eventually To Tame Deficit,” Reuters, 4/6/10)

A NATIONAL SALES TAX WOULD INCREASE THE COST OF EVERYDAY ITEMS …

National Sales Tax Would Increase The Price Of Groceries And Services. “The VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer … It would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer.” (Lori Montgomery, “Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look,” The Washington Post, 5/27/09)

And Would Raise The Price Of Everything From “Food, Clothing, Housing, And Health Care.” “Some suggest the VAT rate should be set as high as 20 percent. At that rate, a VAT that covers all goods and services in the economy--including food, clothing, housing, and health care--would collect an additional $1,260 billion a year and cost every U.S. household $10,680 annually.” (Curtis S. Dubay, “Value-Added Tax: No Solution For Health Care Or Fiscal Woes,” WebMemo #2532, The Heritage Foundation, 7/9/09)

Which Is Why This European-Style Tax Would Fall “Heavily On The Poor.” “[S]ome Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax. Common around the world, including in Europe, such a tax … -- has not been seriously considered in the United States … It is also hugely regressive, falling heavily on the poor.” (Lori Montgomery, “Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look,” The Washington Post, 5/27/09)

JUST AS A NATIONAL ENERGY TAX WOULD INCREASE THE COST OF EVERYDAY ITEMS … 

Obama Admits “Electricity Rates Would Necessarily Skyrocket” Under National Energy Tax. Obama: “When I was asked earlier about the issue of coal, you know, under my plan of a cap and trade system, electricity rates would necessarily skyrocket. Even regardless of what I say about whether coal is good or bad. Because I’m capping greenhouse gases, coal power plants, you know, natural gas, you name it, whatever the plants were, whatever the industry was, uh, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers.” (Sen. Barack Obama, Interview with San Francisco Chronicle Editorial Board, 1/17/08)

Obama’s Agriculture Secretary Says Farmers’ Costs Will Go Up, Eventually Raising Grocery Prices. Rep. Moran (R-KS): “What do you estimate the increase in costs to be for farmers as a result of this legislation?” Sec. Tom Vilsack: “I think it is fair to say there may be additional costs associated with a farming operation ...”; “[T]he reality is that this bill will have huge adverse effects on agriculture because of increases in energy prices and agriculture is energy intensive  that in turn will have impacts on consumer food prices.” (Ag Committee Hearing On Cap & Trade Bill,” Press Release, 6/12/09; Bob Stallman, “Climate Bill Should Not Ignore Agriculture,” American Farm Bureau, 6/11/09)

National Energy Tax Will Mean Higher Gas Prices. “NACS is concerned that certain provisions in pending legislation (such as the allocation of allowances) may result in dramatically higher costs for motor fuels, which will significantly distress our customers…The leading proposals in the House and Senate will have a massive impact on virtually every aspect of the American economy. To ensure that consumers and small business owners do not bear an unreasonable economic burden, it is essential that Congress reconsider the direction in which it is currently heading.” (Letter to House Energy and Commerce Committee Chairman Henry Waxman and Ranking Member Joe Barton, National Association of Convenience Stores, 6/23/09)

And Higher Prices For Medicine And Clothing. “Any substantial cost increases imposed directly or indirectly on trucks by H.R. 2454 will curtail the delivery of vital consumer goods across the nation such as food, medicine, and clothing. Constraining the country’s freight delivery system would change our way of life for the worse by significantly increasing the cost of everything we buy.” (Statement of G. Tommy Hodges, on behalf of the American Trucking Associations, Inc. (ATA), Before the House Committee on Energy and Commerce, 6/9/09)

That’s Why Warren Buffet Says Cap-And-Trade Is A “Huge Tax” That Will Hit Poor Americans Hardest. “I think if you get into the way it was written, it’s a huge tax and there’s no sense calling it anything else.  I mean, it is a tax.  And it’s a fairly regressive tax.”  (Warren Buffett’s Live Lunch Interview, CNBC’s Power Lunch, 6/24/09) 

ALL TO PAY FOR OBAMA’S RECORD-SETTING BINGE SPENDING

Obama’s $3.8 Trillion Budget For FY2011 Will Leave “$8.5 Trillion In Additional Debt Over The Next Decade.”  “President Barack Obama’s $3.8 trillion budget for fiscal 2011 raises $2 trillion in taxes, cuts spending on programs with considerable political support and still leaves the nation with $8.5 trillion in additional debt over the next decade.” (Jonathan Weisman, “White House Proposes $3.8 Trillion Budget,” The Wall Street Journal, 2/1/10)

According To CBO, Obama’s FY2010 Deficit Projected To Be Record $1.5 Trillion. “If the President’s proposals were enacted, the federal government would record deficits of $1.5 trillion in 2010 and $1.3 trillion in 2011.” (“An Analysis Of The President’s Budgetary Proposals For Fiscal Year 2011,” Congressional Budget Office, March 2010)

• After Ringing Up Record-Setting $1.42 Trillion Deficit Last Year, Nearly Triple The Previous Record. (David Jackson, “Obama Team Makes It Official, Budget Deficit Hits Record. By A Lot,” USA Today’s “The Oval“ Blog, 10/16/09)

CBO Says Obama’s Budget Will Lead To $20.3 Trillion Debt By 2020, Equaling 90 Percent Of GDP.  “Under the President’s budget, debt held by the public would grow from $7.5 trillion (53 percent of GDP) at the end of 2009 to $20.3 trillion (90 percent of GDP) at the end of 2020—$5 trillion above what CBO projects for 2020 in its baseline (see Figure 1-2).” (“An Analysis Of The President’s Budgetary Proposals For Fiscal Year 2011,” Congressional Budget Office, March 2010)