Let's talk about it with our senior political analyst, David Gergen.
There was a modest -- a relatively modest tax cut for middle class Americans. A lot of rich Americans are bracing for -- for bigger tax -- tax rates. But so far, it hasn't happened.
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST, FORMER PRESIDENTIAL ADVISER: It hasn't happened, Wolf. But a lot of Republicans point out that they're -- the Congress has passed a number of tax increases. They are coming. They haven't hit yet, but they are coming.
But I think the -- the entry point today, Wolf, on Tax Day, is that everyone agrees that the deficits are too big and must be brought down. But there's a real disconnect now between the conversation one hears in Washington about how to do that and what one hears out around the country.
In Washington, you hear a lot of talk about higher taxes as a solution to the deficit problem and especially you're hearing from Nancy Pelosi and others about the idea of a new national sales tax -- a so-called VAT tax, a value-added tax.
And I've heard talk in the -- inside the administration at high levels of a possibility of a VAT tax that might be as much as 6 percent. And that would be on top of, not as a replacement for, but on top of, current income taxes, that are going up.
Now, that's the talk in Washington. Around the country, you hear, wait a minute. Two-thirds of the people say in a poll they're -- they -- they already feel overtaxed. You know, the CNN -- the new CNN poll finds that three quarters of people say the government is wasting far too much money.
And so there's a strong preference out in the country for solving the deficit problem by cutting spending first and only then, if you have to, as a last resort, raising some taxes. So I find on this Tax Day, there's a very -- there's a growing disconnect between the Washington conversation and what -- what you hear around the country.
BLITZER: Well, on this whole issue of a value-added tax which, in effect, is a national sales tax, it would be a total, total violation of President Obama's commitment, often made during the campaign, that if your household makes less than $250,000 a year or if you're a single individual making less than $150,000 a year, there won't be a dime increase in your taxes.
This would go across the board, a value-added tax -- a national sales tax. It would affect poor people, middle class people and rich people alike.
GERGEN: Well, again, Wolf, there are Republicans like Karl Rove arguing in the newspapers today that there are already small taxes that have been put on people below $200,000.
But on the value-added tax, in fairness to the administration and in others around the president and the Democratic Party, when they talk about a VAT tax, they are talking about taking a portion of the revenue and returning it to people at the lower end to sort of make up the difference, in effect, so that there -- they would pay very little of the tax impact.
Now how much would actually get to them, who knows?
But they are talking about a rebate for lower income Americans. And so we don't know quite where this is going to wind up. They're also talking about a rebate for small business. This is going to be very complicated.
But, Wolf, I think you and I know in the next six to 12 months, we're going to hear a lot more talk about what are the solutions to the deficits, how much of this, where is it going to come from on the spending side, what are we going to cut, after all?
Are you going to cut Medicare again or are you going to raise taxes?
So something clearly has to be done.
BLITZER: Because if you're concerned about the debt or the deficit, there's only three ways you could deal with it. You can cut tax -- you can increase taxes; you can cut spending; or, if the economy gets great and more revenue is flowing into the tax coffers, the IRS or whatever, then you can cut some of that deficit.
GERGEN: Yes.
BLITZER: But the most painful, of course, is to cut spending for a lot of these programs.
GERGEN: Well, Wolf, as you know, the short-term painless way to do it is just to print more money. But that creates inflation and in the long run...
BLITZER: Yes.
GERGEN: -- it costs you one heck of a lot (INAUDIBLE).
BLITZER: There's a fourth way, too.
GERGEN: Yes.
BLITZER: If you're saying that.
All right. Thanks very much, David.
Transcript from CNN's the Situation Room April 15, 2010