Group claims VAT would break Obama's tax promise to middle class

The right-leaning Americans for Tax Reform on Thursday claimed if President Obama creates a value-added-tax he will break his campaign promise to not raise taxes on individuals earning less than $200,000 and couples making less than $250,000. 

The group argues that despite the tax being incurred at the time of production, and not at the point of sale like a consumption tax, its cost is passed along to consumers by increasing the cost of goods sold. Many of these consumers would be middle and lower income wage earners and subjected to what is essentially a backdoor, or hidden, tax.     

"It is passed along until it literally becomes as much an inherent and cloaked component in the price as transportation or labor," the group stated.

News has been mixed about whether the White House is examining a VAT. White Press Secretary Andrew Gibbs on Wednesday the tax is not on the negotiation table, but President Obama in an interview with CNBC deemed the levy a "novel" idea. 

"I know that there's been a lot of talk around town lately about the value-added-tax," Obama told CNBC's John Harwood. "That is something that has worked for some countries. It's something that would be novel for the United States."

ATR claims the VAT is a gateway to increased federal spending, and points to Europe, which enacted a VAT in 1967 that has nearly doubled in terms of its affect on GDP. 

House Ways and Means Chairman Sandy Levin (D-Mich.) said his committee is not talking about creating a VAT. But lobbyist predict tax writers will raise the topic after the election as they look to reform the tax code in 2011.