Don't get me wrong: a VAT has benefits as well -- particularly if you aren't bothered by the poor paying a greater share of their income to taxes. I just find it highly unlikely a congress with strong Democrat [sic] majorities and a very progressive president would ever allow it. After all, they could instead rely on a plethora of other options, such as further increasing taxes on the rich or imposing high luxury good taxes, as more liberal-minded alternatives.I'm not so sure.
As Matt Yglesias noted here (citing data turned up by Lane Kenworthy) the regressive-consumption-tax-plus-generous-welfare-state model is the norm in Europe. Indeed, the bulk of the redistribution undertaken on the continent (and in Britain and Australia, for that matter) is a result of direct transfers rather than progressive taxation. Far from being inimical to a social democratic outlook, it's a principle tenet.
If I had to anticipate the primary opposition to a sales tax, I'd guess that it would come from the right. Adoption of the tax would be predicated on the idea that current tax structures are insufficient to support current and future levels of spending, and would be impossible in the absence of compensating social spending -- on health care, education, and so on. For a Republican to agree to such a tax would be to abandon some of his dearest principles: a commitment (at least in theory) to smalller government -- a starved beast -- and a determination to limit the growth of entitlements and the intrusion of the government into the private health care system.
There might be some combination of sales tax plus corporate tax cuts that could peel off the necessary conservative support. But in general, any new tax that funds universal health insurance will pass despite Republican, and not Democratic, opposition.
You're certainly correct that adding a sales tax as opposed to replacing current taxes with a sales tax would be opposed by the right.
However, the short term principle opposition would be that there's really no way to institute one without making a mockery of President Obama's campaign promises about raising taxes only on the rich. Of course, there's no way to close the deficit without making a mockery of that promise anyway. It is hypothetically possible to return the deficit in 2012-2019 down to Bush levels by raising taxes only on the rich, though that would involve having taxes go above Canada/UK levels even without funding universal health insurance. Even just paying for the additional Pell Grant and discretionary spending in the President's budget compared to baseline (ignoring AMT and extending the Bush tax cuts on the lower income brackets that were likely to be extended anyway) would require some $60-$120 billion per year, an amount somewhat larger than the entire additional revenue obtained by letting the upper bracket tax cuts expire.
So I suppose the origin of the political pushback depends on how much the President and his party fears middle-class backlash from the inevitable necessity of abrogating his promise to only raise taxes on the wealthy. Republicans might oppose the proposal, but I suspect at the same time they'd be happy politically for the President to propose it. Whereas on the other hand Democrats might do the most behind to the scenes to prevent the proposals from even happening.
One problem with a national sales tax is how to eliminate the current income tax system. I have a hard time getting excited about this because of the uphill battle it would require to amend the Constitution to make it certain. If the income tax were only ended by statute, Congress could reinstate it at will. They would be tempted to keep it to apply to the highest earners. But remember when the income tax was implemented in 1913 the exemptions were so high it only applied to about 1% of taxpayers. It was easy to favor a tax that didn’t apply to you or anybody you knew. But once in place, all this was changed a little bit at a time. www.santaclaussyndrome.com
I'm pretty sure that adding a VAT on top of the current income tax structure is just the way to jump start a consumer-led economy? What could possibly go wrong?
The distribution of the actual tax burden of taxing future consumption is not going to be much different than the burden of taxing income from future production. The distribution of who writes the check to the government is different. Combine the "fair tax" with Bruce Bartlett arguing that the VAT is more efficient than a retail sales tax and conservatives could prefer replacing income taxes with a VAT. Add a per capita subsidy (pre-bate) or perhaps a "universal health care stamp" program and it becomes more progressive than the current income tax burden.
The conservative opposition is that a transition from our our current tax system will lead to government substantially increasing taxes and spending never achieving to the intended final result.
If you are uninsured and does not have insurance, you should check out the website http://UninsuredAmerica.blogspot.com - John Mayer, California