VAT's Life?



The people who brought you the oil import fee and higher cigarette and gasoline taxes are now pitching a value-added tax (VAT), which slaps on a levy at each stage of production. For the struggling tax raiser, a VAT has several advantages. It functions like a sales tax, but a hidden one, so people generally won't know what it costs them. Higher prices for goods and services might encourage savings, so moderate Republicans who would probably balk at any other tax might grudgingly support a VAT. Finally, the Congressional Budget Office estimates that a 5 percent VAT could take $100 billion a year out of taxpayers' pockets.

Of course, there's no reason why the VAT couldn't be raised if the deficit still refused to budge. Indeed, a quick look at VATs in other countries shows that the rates do tend to rise.