With the interest on the national debt in 2024 amounting to $870 billion—more than the country spends on defense—America must enact a solution in the form of a value-added tax, wrote Peter J. Tanus for CNBC.
It’s unlikely that Congress will tackle the deficit until a major crisis occurs, possibly in the form of an uncontrollable interest rate spike, the effect of which will dangerously echo throughout the economy. Other solutions to the problem are challenging—spending reduction options are few and far between because mandatory obligations—like Social Security, Medicare and Medicaid—add up to $3.8 trillion out of a $6.1 trillion budget. For discretionary spending, the $1.8 billion defense budget takes up the largest share.
Every other developed country has established a value-added tax, Tanus wrote, which is added not at the point of sale, but rather throughout stages of production. The Congressional Budget Office estimates that a 5% VAT could raise $3 trillion over the next 10 or so years, but those against it say it would hurt low-income Americans the most. The solution? Allow a tax credit for lower-income earners, Tanus suggested.
