Discussion of a value-added tax in the US has long been limited to academics and political extremists. That changed when Senator Kent Conrad, chair of the Senate Budget Committee, recently spoke in favor of including VAT in the forthcoming congressional discussion of federal tax reform.
Any VAT proposal will face stiff opposition from American conservatives who would prefer to reduce taxes at every turn. Resistance to a VAT will be all the more hostile if, as rumored, it will be used to support a universal, socialized healthcare system. However, if, and only if, that fight is lost and publicly funded health care becomes an inescapable conclusion, the political right could actually come to favour a value-added tax.
Just walk in to a barber shop in any conservative American community and ask the patrons about their objections to universal health care. There will be those who complain about creating a culture of dependence on the government, those who are concerned about negative effects on the quality of health care, and those who simply do not want to pay other people’s medical bills. This last group might be most inclined to warm up to VAT.
The main criticism of VAT is its potentially regressive nature. Although everyone pays the same markup on purchases, VAT represents a higher percentage of total income for the poor than the wealthy. It is the burden on the disadvantaged, however, that may placate some conservatives because it means that everyone, rich or poor, will be paying for at least some of their own health care. Compared to an increase in the current progressive federal income tax, a value-added tax might be seen by some as a lesser evil.