Where, oh where, oh where, do I begin with this? Maybe a better question is, where will this all end? Yesterday, Paul Volcker, former Federal Reserve Chairman and current economic advisor to President Obama, floated the administration’s trial balloon on a VAT – value added tax.

This is a particularly pernicious tax that gets added to a product as it moves from one stage of production to the next. That iron ore gets taxed as it goes to the steel mill, then the steel gets taxed as it goes to the foundry, which then has to tax the widget it just made out of the steel, which then gets put into a sub-assembly that is taxed again when it is shipped to the final manufacturer of whatever the end product is. The end purchaser – the consumer – never sees the tax directly; the tax is rolled into the retail cost of the product. Depending on the product and the percentage of the VAT, this can be hundreds of dollars on things like cars, appliances, computers, etc.

Only a fool would think Volker was speaking off the cuff or only representing his own thoughts. This was one of the first salvoes to come out of the Obama administration in their pursuit of additional income to support their expansion of government programs. There is no expectation that Obama intends to stick to his promises of no new taxes on the middle class. Indeed, that idea was tossed out the window with the passage of the health care reform bill that includes all sorts of taxes, direct and otherwise.

This kind of tax is what politicians just love. It’s not in the open like a sales tax or an income tax. All the consumer sees is higher prices on the products he wants – and needs – to buy. Not only that, but this kind of tax soaks everyone, from rich to poor. This is obviously required if Obama’s additional programs go into affect. There is no way that taxes paid only by the rich will be able to cover the massive costs of these programs. We are all going to pay the piper on this one.

I have heard politicians commenting on Volker’s suggestion of a VAT. For some reason, which I cannot fathom, there seems to be an air of resignation that something like this is going to be necessary. This same situation exists in my home state of Illinois. The state government is spending more than it is taking in, so our governor’s solution is to raise the state income tax. Everywhere you turn, government entities are complaining that they are suffering from a downturn in tax receipts, a natural result of the downturn in the economy. Time and again, the only solution they can find is to raise taxes.

There is a political fear of cutting government programs. Someone, somewhere, is going to scream loud and long when their favorite program takes a hit, and there doesn’t appear to be a politician alive today who has the courage to lay out the basic truth that spending must be cut even if it means making people unhappy. Yes, someone is going to “suffer” when funding is cut, but are you willing to bring everyone down to that level of suffering for the benefit of the few who would be affected by program cuts?

Let’s not even talk about program cuts. What politician in his or her right mind would even consider creating new entitlement programs that are going to cost billions and billions of dollars? Why create a deficit that is going to demand some kind of new tax income right from the beginning? Obviously these are rhetorical questions because our federal government has done exactly that with this new health care reform bill. Were they just being stupid? Of course not. They knew that new sources of income would be required, as evidenced by the new taxes included in the bill, but they also knew that even more funding would be required than those provided for in the bill. From the very beginning they knew that they were going to have to rob Peter to pay Paul. Indeed, that is their ultimate goal – the redistribution of “wealth.”

While many politicians seem to almost consider a VAT or similar tax a fait accompli, I am not so sure that the American people are going to stand for it. They have just had a health care bill crammed down their throats and it is still stuck there. If any politician thinks that they are going to be able to slide a tax increase down that same throat I believe they will be in for a very unpleasant surprise when the taxpayer gags and throws up all over them. I certainly hope the citizens of the United States are not going to be so complacent as to allow themselves to be steamrolled again like they were with the health bill. I guess we will see what the mood of the country is after the next election. I only hope it won’t be too late to turn things around by then.