White House advisor and former Fed Chairman Paul Volcker (pictured) said on Tuesday that the United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax.
What is a Value added tax (VAT)? It’s like a national sales tax only a lot more complicated because it involves goods and services including labor.
A value-added tax is a fee that is assessed against businesses by a government at various stages in the production of goods or services -- usually any time a product is resold or value is added to it.
For tax purposes, value is added whenever the value of a product increases as a result of the application of a company's factors of production, such as labor and equipment. 
A new car buyer pays the value added tax at the time of purchase. The photo above shows all of the individual items involved in the value added tax.
The tax must be paid by every company that handles a product during its transition from raw materials to finished goods.
For example, tax is charged when a manufacturer sells to a wholesaler and again when a wholesaler sells to a retailer.
On the surface a value added tax may sound innocent enough but when implemented, it will change the price of goods and services significantly. At the very least, manufacturers will charge for all of the additional accounting work involved keeping track of taxes for each step of the process.
The worst part of a value added tax is that it is a regressive tax, meaning the poor pay more, as a percentage of their income, than the rich.
The fear that Obama will impose a value added tax is very real. He must find some way to pay for everything from the disastrous ‘cash for clunkers’ to the multitude of bailouts. However, it’s the pork laden ObamaCare law and the costly bribes it took to get it passed that will bring down his financial house of cards without something drastic such as a value added tax.
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