With two Republican presidential candidates embracing a value-added tax (VAT), it is worth looking back at the original federal debate over that bad policy idea.
Richard Nixon appears to have been the first U.S. leader to push for a VAT, which is not surprising given that he was perhaps the most statist GOP president of the 20th century. With a three-percent VAT in mind, Nixon called for new federal financing of local schools in his 1972 State of the Union address.
A 1972 Congressional Quarterly article examined Nixon’s VAT. (The first link when you Google “richard nixon vat congressional quarterly”). The article reveals that the administration looked fondly on a VAT because of its large revenue-raising potential—both for funding schools and for funding a general expansion of the welfare state:
Read the rest of this post →Two major reasons were apparent for the Nixon administration’s consideration of a value added tax. The first was the condition of federal finances.
The budget for fiscal year 1973, which the President sent to Congress Jan. 24, included a five-year forecast showing that in fiscal 1977 the only surplus funds foreseeable would result from a proposed increase in Social Security taxes. Projected costs of existing and proposed programs were expected to absorb all revenues from existing taxes and other sources. This meant that no new programs could be inaugurated without new taxes to finance them or reduction of existing programs to release funds. Though initially pledged for education, revenues from an expanding value added tax might provide future funding for other programs.
The second reason was the situation in public schools and school districts.