Simpson says VAT critics distorting fiscal panel's efforts

The Republican co-chairman of the White House fiscal commission said critics of the value-added tax (VAT) are trying to distort his panel's efforts.

Former Sen. Alan Simpson (R-Wyo.) said Wednesday that those warning against a VAT, which raises the price of goods and is common in Europe, are making it sound like "you're coming in and slapping it on top of the income tax."

"VAT tax, what the hell? If you do a VAT tax, you've got to do some adjustments to the income tax," Simpson said at an event on the federal debt sponsored by the fiscal watchdog group Peter G. Peterson Foundation.

"Never let them distort who they are," Simpson said when asked how he'll deal with attacks on the fiscal commission.

Republicans in Congress have warned the fiscal commission created by President Barack Obama to rein in deficits would lead to higher taxes, and possibly a VAT. A non-binding resolution sponsored by Sen. John McCain (R-Ariz.) opposing the VAT received 84 votes this month in the Senate, and many Democrats supported it. 

VAT proponents have said the tax is more efficient and does more to encourage investing and saving than income taxes. 

Rudy Penner, a former Congressional Budget Office director, told Obama's commission Tuesday that one way to close deficits would be a new tax code with a VAT and lower income-tax brackets.

Former Federal Reserve Chairman Paul Volcker, who advises Obama on financial reform issues, has also suggested a VAT should be considered.

Obama and his fiscal commission's co-chairmen have said "everything is on the table," including the VAT, as they try to craft a fiscal reform plan

Erskine Bowles, the panel’s Democratic co-chairman, said both parties will need to make tough choices to come up with a serious deficit-reduction plan.

Democrats who stress the need for more jobs must also recognize how rising debt could harm the economy, Bowles said. To deal with debt, Democrats should be open to spending cuts and more changes to the healthcare system instead of considering only new taxes, Bowles said.

"You can't solve that problem through increased taxes, because no matter what else you look at today, the cost of healthcare is growing faster than GDP," Bowles said. 



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