From David Hogberg at Investor's Business Daily:
Democratic lawmakers, scrambling to find a way to finance a trillion-dollar expansion of government health care, are mulling the creation of a value-added tax.
But such a political cure could be worse than the disease, intensifying already-growing opposition from the public and business.
Unlike a sales tax that applies only to the point of purchase, a VAT taxes the value added at each stage of production. Thus, if the VAT rate is 5% and a producer of raw materials, a manufacturer and a retailer each add $1.00 of value to a product, then each owes the government five cents.
A source close to the Ways and Means Committee said House Democrats may be considering a VAT of 1% to 1.5%. That could raise $70 billion-$105 billion annually, based on calculations from a Congressional Research Service report.
Housing, education and medical care could be exempted, which would require a VAT of 2%-3% to raise the same amount of revenue.
Democrats on Ways and Means didn't return calls for comment.
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