FNC's Hume: Value-Added Tax Passage During Congressional Lame-Duck Session a Possibility

So we have a health care reform entitlement now, along with various unfunded liabilities, courtesy of the federal government. The next question is - how are we going to pay for all of it?

Last week following the passage of health care legislation, syndicated columnist Charles Krauthammer predicted a value-added tax (or VAT) could be in the works, which is a consumption tax that is placed on a product whenever value is added at a stage of production and at final sale.

However, former Fox News "Special Report" anchor Brit Hume, now a senior political analyst for network, said there was a possibility the VAT could be pushed into law during a lame-duck session of Congress, if loss for the Democratic Party are steep enough to force them to relinquish their control following the 2008 cycle.

"I think the projected savings, if they actually came to pass, would be in the order of 140 some billion dollars," Hume said. "That is a drop in the bucket against these levels of debt and particularly against the levels of entitlement debt, which is why I think after the news on social security and after the difficulty selling government bonds last week with lifted interest rates - you may start, as Charles Krauthammer fears, to hear about a value-added tax, a form of sales tax. You could hardly get it through the Congress right now, but you might be able to slip it through after the election, with the old Congress still seated, the new Congress not yet here during the so-called lame duck session. I don't think it is yet likely but I wouldn't rule it out."

A VAT could be detrimental for the U.S. economy and it wouldn't be a cure-all for government debt, as Chris Edwards pointed out for Cato @ Liberty last year. Instead, this would encourage more spending and higher tax rates, causing an impediment to U.S. economic growth.

"In sum, a VAT would not solve our deficit problems because Congress would simply boost its spending even higher, as happened in Europe as VAT rates increased over time," Edwards wrote. "Also, a VAT is not needed to cut the corporate income tax rate because a corporate rate cut would be self-financing over the long-term as tax avoidance fell and economic growth increased."