While the United States has long had federal sales taxes on specific products such as gasoline, Congress has never -- and, many believed, would never -- consider imposing what most of the rest of the world calls a VAT, aka value-added task.
Recently, however, skyrocketing budget deficits (the federal financial sector bailout alone has indebted every man, woman and child in America to the tune of roughly $46,000), has severely shifted the tectonic plates beneath the bedrock belief that the VAT could never happen here.
In fact, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.
Although it is fairly common around the world, including in Europe, the VAT has not been seriously considered in the United States. But experts claim few other taxes can generate the kind of money the nation will need to avert fiscal chaos.
At a White House conference earlier this year, a bunch of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. And recently, after arguing with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.
Since a VAT is a tax on the transfer of goods and services it is ultimately paid by the consumer. VATs tend to increase the price of just about everything, from a gallon of milk to a visit with a lawyer. It is also hugely regressive, being especially hard on the poor.
But VAT fans say those negatives could be dealt with and improved upon by using the proceeds to pay for health care for every American. This would turn the VAT into a tangible benefit that is definitely needed by low-income families.
A White House official said a VAT is "unlikely to be in the mix" as a way to pay for health-care reform. "While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers," said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag. Time will tell if the VAT will work out for our country.