It was obvious on the day that health-care was signed. We enacted the largest entitlement since the New Deal. We're now reaching levels of the European entitlement state and we are going to have to have European levels of taxation.
Now, how are you going to do it? The income tax is tapped out. As a result of Republican efforts, half of the American people pay zero income tax and you can only squeeze so much out of the other half. We're already going to be raising taxes when the Bush cuts expire.
All that is left is the VAT. That is what happens in Europe. And the reason it's attractive and it's so inevitable is because it creates a river of cash, where one percent is $100 billion a year of revenue. So a 10 percent [VAT] here would be $1 trillion a year.
The Europeans have it at levels of about 20 percent. It's addicting. If you raise it a half a percent or one [percent], you get a lot of money and nobody really notices. And the VAT is not quite a sales tax because a lot of it is hidden. . . .
That's why politicians love it — because a lot of it is hidden in the price of the item. Only a bit of is [visible] on the surface as a tax. So I think ultimately it will be enacted.
Obama as a candidate would never speak about it and the Democrats up until enactment of health care pretended no new taxes would be involved. It obviously is coming. . . .
[The Democrats] will deny it [contemplating a VAT] until elections in November. They'll say we're not considering it. What a crazy idea. Only Republicans and conservatives are implying it's inevitable.
The day after elections it will become an issue again. The deficit commission will report to the president after Election Day. It will be a major recommendation, I assure you.
Even if (or maybe because?) the Democrats lose the House this Fall, expect this tax to be passed before they leave in Jan 2011.