Republicans yesterday accused President Obama of plotting to slap a hefty new European-style “value added tax” on Americans after one of his top advisers raised the idea.

“To make up for the largest levels of spending and deficits in modern history, the administration is laying the foundation for a large, misguided new tax, a first-time American VAT,” fumed Sen. Charles Grassley (R-Iowa), the top GOPer on the Senate Finance Committee.

“If the president wants to add completely new layers of taxation, then he should take this issue before the American people when he runs for re-election.”

Paul Volcker, head of Obama’s Council of Economic Advisers, started a furor in New York Tuesday when he said the VAT “was not as toxic an idea” as it had been in the past as a way to rein in deficits.

“If at the end of the day we need to raise taxes, we should raise taxes,” he said at the New-York Historical Society.

A VAT is a percentage tax on the value added to goods and services levied at each phase of production. Manufacturers pay tax on the amount of goods they produce, minus the taxes they themselves paid on the products used in production. It is different from a typical sales tax, where a consumer pays a percentage tax at the end of a supply chain.

A day after Volcker’s statement the White House kept a healthy distance from the statement.

“Mr. Volcker was speaking for himself and not the administration,” a White House aide said.

“The president has not proposed this idea nor is it under consideration. The president has passed historic tax cuts for middle-class families and continues to push for more tax cuts. The president is not proposing to cut the deficit at the expense of middle-class families.”

The idea would face trouble in Congress from members of both parties. A senior aide to House Ways and Means Committee member Rep. Joe Crowley said the Queens Democrat “hopes the administration explores other options beyond the VAT as a way to address the national debt.”

But Bruce Bartlett, a former Reagan economic adviser, said the country’s finances are in such dire shape, a VAT is the best option to move forward.

“It’s a bad situation,” he said.

(Source: NY Post)