May 28th, 2009
04:00 PM ET

National sales tax the answer to reducing deficits, paying for health care?

FROM CNN's Jack Cafferty:

The idea of a national sales tax as a way to reduce deficits - which could total $4 trillion over the next 5 years - and pay for health care seems to be picking up steam.[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/05/28/art.manillavat.gi.jpg caption="Protestors in Manilla show anti-VAT signs in 2006. A value-added tax may be gaining traction with lawmakers in the U.S."]

The Washington Post reports that some lawmakers and experts suggest such a tax is one of the only ways to right our financial ship. A "Value Added Tax" or VAT is a tax on the transfer of goods and services - that would include everything from a gallon of milk to a visit with a lawyer. This kind of tax is used in more than 130 countries, and ranges from 5% in Japan to 25% in Hungary and parts of Scandinavia.

One downside is that a national sales tax would fall more heavily on the poor, but supporters say that could be offset by using the proceeds to pay for health care for every American.

Other potential advantages are that this kind of tax is hard to dodge and it punishes spending rather than saving, which the Obama administration wants to encourage. Also, some economists say the threat of a VAT could help pull the country out of a recession sooner by making consumers spend before the tax hits. Depending on what percentage the VAT tax would be, it could exempt millions of Americans from paying income tax and lower the top income bracket for wealthier people.

Top government officials from Former Fed Chairman Paul Volcker to the chairman of the Senate Budget Committee have expressed interest in exploring the idea.

Here’s my question to you: Is a national sales tax the answer to reducing deficits and paying for health care reform?

Interested to know which ones made it on air?


Filed under: Health care • National Sales Tax