Ways and Means Chairman Doubts VAT Will Prevail
Policy + Politics

Ways and Means Chairman Doubts VAT Will Prevail

Tax code reform this year? That’s probably not in the cards, and neither is a value-added tax (VAT), according to House Ways and Means Committee Chairman Sander Levin, D-Mich., who spoke Monday at the National Press Club.

The mild-mannered Levin, 78, who recently replaced embattled Rep. Charles B. Rangel as chairman of the tax-writing committee, said this year’s game plan is to address the expiring tax cuts enacted by Congress during the administration of President George W. Bush in 2001 and 2003. The Obama administration and congressional Democrats favor a strategy of allowing the tax cuts of high-income Americans to expire while extending middle-class tax breaks set to expire in January, as well as small-business tax breaks which have already expired, and revising estate tax law. Levin appeared confident that the House would go along with this approach, but raised concerns about whether the plan could attract the supermajority of 60 votes that will be needed in the Senate to extend the middle-class tax cut. "Tell me how we get 60 votes," Levin said, "I'm not sure how we do that, but that has to be the focus in the coming months.”

While White House adviser Paul Volcker, a former Federal Reserve chairman, and a handful of other economists have touted the European-style VAT tax as a revenue raiser, Levin discounted the concept, saying he hasn’t heard any Democratic lawmakers seriously mention it until two weeks ago when Volcker first floated the idea. Echoing last week’s 85-13 Senate vote on a nonbinding resolution opposing a VAT, Levin predicted it would be “a goner” by next week.

“I think it’s being raised mostly by the Republicans for political gain. They're trying to label us as taxers,” Levin said.

The VAT, which is essentially a national sales tax, could raise $293 billion in 2012 and $3.3 trillion by 2019 at a 5 percent flat rate, according to a study by the Tax Policy Center. Most conservatives oppose the VAT’s tax increase implications, some liberals peg it as a regressive tax, and others, like Washington Post columnist Robert Samuelson, say it would allow the federal government to avoid addressing major spending cuts needed to lower the deficit.