Making Sense, by Michael Reagan

Democrats in Washington haven't wanted to be terribly forthcoming as to how they intend to pay for the new health care entitlement program and other massive spending programs being passed. It seems our national debt ceiling is now raised every few months, and the federal deficit is higher than it's ever been -- exponentially so.

taxes irs value-added tax vat

Cartoon by Daryl Cagle - (click to purchase)

Well, we can now see why the liberal establishment hasn't wanted to address the issue head-on with the American people. At a private event the other evening, it has been reported that one of the Obama Administration's lead economic counselors, Paul Volcker, indicated the support for a Value-Added Tax (VAT) may be more achievable than in the past.

This statement does not surprise me in the least. You see, in order to fund the record spending of the federal government, hard-working families and small businesses are going to be required to foot more of the bill. It is that simple. After passage of a nearly $1 trillion health care bill, the Obama administration cannot longer deny this. The only question in my mind has been how much will our taxes be raised -- and when.

A VAT is a tax that is added to a good at each stage of the production process. So when a hypothetical widget's first component is put together a tax is added. That's just the start. At each further stage of assembly, development and distribution, a new tax is added, all the way through until final sale. Not surprisingly, VAT taxes are not borne wholly by the producers themselves. Rather those incremental taxes are passed along to consumers in the form of higher prices.

Even most troubling, this tax comes with a complete lack of transparency. Unlike a sales tax, which the consumer sees as a line item on their sales receipt beyond the retail price, a VAT is simply a hidden tax. It is another way for the federal government to take our money and deliberately leave taxpayers in the dark about their share of footing the bloated federal budget.

Now keep in mind, the addition of a VAT would be on top of our already overly burdensome federal tax system -- meaning that you would continue to pay your federal income, payroll, capital gains, and estate taxes. Don't be deceived into seeing this as a sister to the FairTax reform. This is an entirely new accounting which will significantly increase the price of every good you buy.

Some will argue that this unofficial statement by Mr. Volcker was merely just an administration official discussing possible new revenue streams with a friendly audience -- not portending things to come. Not so. Things rarely happen from our leaders in Washington by accident. This was the first salvo in what many of us have feared -- Democrats gearing up to increase our tax burden by creating a new form of federal taxation.

Those of us who believe that the federal government should learn to do its job with less money, just as the private sector is forced to do, must begin to prepare for this battle. We almost stopped the passage of health care reform despite little time to gear up a national effort in opposition. Short of a procedural maneuver, we would have succeeded.

Here, we have the advantage of time on our side and we must get ready to fight. Fight for smaller, smarter government; fight to keep more of our hard earned dollars; fight against yet another policy that moves us closer to the European Socialist model.

Join me at Reagan PAC at to join a grassroots force that will help lead the charge in keeping the VAT in Europe from being imported to our shores.


Mike Reagan, the elder son of the late President Ronald Reagan, is spokesperson for The Reagan PAC ( and chairman and president of The Reagan Legacy Foundation ( Look for Mike's books and other information at E-mail comments to [email protected].

©2010 Mike Reagan. If you're not a paying subscriber to our service, you must contact us to print or Web post this column. Mike's column is distributed exclusively by: Cagle Cartoons, Inc., newspaper syndicate. For info contact Cari Dawson Bartley. E-mail [email protected], (800) 696-7561.