Monday, April 12, 2010

Volcker’s VAT Plan Is Nuts, Absolutely Nuts

by Larry Kudlow

As I’ve said many times over the past year or so, there are major storm clouds looming on the horizon for our fragile, yet recovering, U.S. economy. The latest ominous cloud comes by way of former Federal Reserve chairman Paul Volcker, who is pushing President Obama to adopt a value-added tax, or VAT.

Now, I have the utmost respect for Paul Volcker.

He was my boss 35 years ago when I worked at the New York Fed. And it was Volcker, of course, who conquered the inflation that took root in the 1970s.

He may very well be the greatest central banker of all time.

But with all due respect, Volcker’s call this week for a European-style VAT (as well as a carbon tax) is itself a historic mistake.

The last thing we need right now is more tax hikes. There are a dozen new tax hikes already squirreled away inside President Obama’s health-care law. Medicare payroll taxes are going to be imposed on capital gains and dividends. Investor taxes are going way up when the Bush tax cuts expire at the end of this year. And to top it all off, half the states in the country are raising taxes.

Look, if you think for a one moment that spendthrift politicians in Washington won’t treat higher tax revenues as their very own honey pot, think again.

That’s exactly what this crowd will do.

Read the rest here.


  1. A VAT tax is crazy. U.S. consumers are already under intense pressure just to survive and now we have to deal with escalating state and local taxes. The states are in terrible trouble and my school and property taxes keep going up to help with the shortfall. If you add the inflating price of gasoline (and the higher prices for just about everything else), a VAT tax will completely kill off most consumers. I know a lot of middle and lower-class folks who avoid buying new products (by shopping at thrift shops and flea markets) simply because they don't have the money--it's why retail stores are suffering. A VAT could be the final nail in the coffin.

  2. I don't always agree with Kudlow but on this issue he is dead on. Especially his last paragraph. Any VAT will simply become another source for more government spending. Its not just a nutty idea, its vicious.