Hatch: Leave VAT out of tax reform proposals

Sen. Orrin Hatch (R-Utah) is urging a White House economic advisory panel to nix the idea of a value-added tax. 

In a letter to Paul Volcker, chairman of the President’s Economic Recovery Advisory Board (PERAB), Hatch said "the negative ramifications of instituting a VAT on top of our existing tax system are so compelling that I strongly urge the PERAB to not include any VAT proposals in its final report." 

"In my view, enacting a VAT on top of our existing tax systems would be a colossal mistake because its purpose would not be to improve the way we collect revenues, but solely to increase the amount of revenues collected,” Hatch said in the letter dated Thursday. 

A report from the PERAB panel could be imminent. On June 11, the Wall Street Journal reported that a list of tax reform ideas including simplifying the tax code, closing tax loopholes, reducing tax evasion and making changes to the outdated corporate tax system could be ready within weeks. 

The report could include a VAT as an option. Volcker has suggested its consideration several times but has said he doubted it would be done in conjunction with the income tax. 

President Barack Obama has said he won't consider any ideas that would increase taxes on families making less than $250,000, in line with his pledge during the election. 

The panel, which includes a range of academics and economic experts, was formed February 2009 and was expected to produce a report by the end of 2009. But Volcker put that on hold indefinitely as the panel continued discussions through this year. 

During that time, the president also created a bipartisan fiscal commission to more closely examine the nation's debt issues. A report is expected from that group in December.