All Roads Are Going to Lead to a VAT
All Roads Are Going to Lead to a VAT
February 2, 2011The Hill - Talk about tax reform: A Senate Budget Committee hearing on Wednesday featured a fair amount of discussion about the merits of a value added tax.
Lawrence Lindsey, a former chief economic adviser to President George W. Bush, especially sung the praises of a VAT, a consumption tax currently utilized in much of the world.
In his testimony, Lindsey said the current income tax system is too complicated and noted that China’s value added tax accounted for a third of its revenues.
“So having an income-based system, while most other countries in the world, including in Europe and Canada, are moving away from an income-based system and toward value added taxation or indirect taxation puts us at a competitive disadvantage,” Lindsey said.
“All roads are going to lead to a VAT,” Lindsey said later in the hearing.
A value added tax, generally speaking, is charged on goods at every stage of production. The VAT has been discussed in recent years as a potential weapon against the deficit, including in a 2009 Washington Post article where Sen. Kent Conrad (D-N.D.), the Budget Committee chairman, said it was something that needed to be on the table.
But at Wednesday’s hearing, senators from both parties threw some cold water on the idea of a VAT. Sen Rob Portman (R-Ohio), a budget director in the George W. Bush administration, called the idea politically difficult. And Sen. Ron Wyden (D-Ore.), a longtime proponent of tax reform, noted that the Senate has overwhelmingly expressed its opposition to a VAT.
Tax reform is an area that has been discussed as a possible area of bipartisan cooperation in the particular Congress. The witnesses at Wednesday’s hearing – who also included Eugene Steuerle of the Urban Institue; Donald Marron of the Urban-Brookings Tax Policy Center; and Rosanne Altshuler of Rutgers University – all said the American tax system was in dire need of fixing.
Former White House Official Pushes VAT at Hearing, But Senator Warns of Backdoor Tax Hike
Retail's BIG Blog - A former top aide to President Bush told a Senate committee this week that “all roads” lead to a value added tax, but a member of the panel countered that a VAT would be a “backdoor” tax hike.
“Having an income-based system while most other countries in the world including in Europe and Canada are moving away from an income-based system and toward value added taxation or indirect taxation puts us all at a competitive disadvantage,” said Lawrence Lindsey, former head of the White House Economic Council under President George W. Bush.
“An income-based tax system really, really doesn’t make sense,” Lindsey added. “I know it is politically difficult, but in the end we don’t have a choice. All roads are going to lead to a VAT.”
Lindsey’s comments came as he testified before the Senate Budget Committee on Wednesday during a hearing on tax reform.
“All other countries in the (Organization for Economic Cooperation and Development) have a VAT,” Rutgers University tax professor Rosanne Altshuler said. “This is how they raise their money.”
But committee member Senator Ron Wyden, D-Ore., noted that a nonbinding resolution passed 85-13 by the Senate last year opposing a VAT received bipartisan support.
“United States senators voted against a VAT,” Wyden said. “As far as I can tell the only surprising part was that it wasn’t more. …The big concern for those who have been for a VAT is that it is … just a backdoor way to hike taxes.”
Senator Rob Portman, R-Ohio, who served as budget director under Bush, said a VAT is “not politically viable in the short term.”
The co-chairmen of President Obama’s deficit reduction commission rejected a VAT in December, offering a proposal that emphasized government spending cuts and reform of existing taxes instead.
NRF has led the retail industry’s fight against creation of a VAT, and in October presented the commission with an in-depth economic analysis conducted for NRF by Ernst & Young and the economic research firm Tax Policy Advisers.
The study found creation of an add-on VAT to reduce the deficit would result in the loss of 850,000 jobs in the first year, reduce gross domestic product for three years, and bring a permanent drop in retail spending totaling $2.5 trillion over the first 10 years. By contrast, the study found an equivalent cut in government spending would result in the creation of 250,000 jobs, GDP would grow, and less than one-fifth of the loss in spending would be seen.
Report: VAT Could Generate $260 Billion in 2012
Many people are not talking about the VAT but I feel that it is a real possibility. The government is going to need our money to fund health care and this is the only viable way for them to do it. Whether they are argue that it is better than the current system, is irrelevant. I predict the VAT tax WILL be pushed on us and even if it is coated with sugar- it will still be a bitter pill to swallow. - Prediction: Value-added Tax Coming to a City Near You, The Heart of America, February 3, 2011April 7, 2010
The Hill - A value-added tax set at 5 percent applied broadly to the U.S. economy in 2012 would generate nearly $260 billion, according to a new report by the Urban-Brookings Tax Policy Center.
A VAT is similar to a sales tax but is applied to all levels of production, not just on the final purchase.
The Tax Policy Center paper, written by Eric Toder and Joseph Rosenberg and released Wednesday, found that a broad-based 5 percent VAT, one that included exemptions only for education, vehicle, consumer interest and government-financed health spending, would result in a $258.6 billion in 2012.
When exemptions were added for housing, groceries and private health spending, a 5 percent VAT would generate $161 billion in revenue in 2012.
The 2012 deficit projected by the Congressional Budget Office under President Barack Obama's economic policies would be $914 billion.
The report finds that revenue from a broad-based VAT could be enough to reduce the top corporate income tax rate from 35 percent to 7.4 percent, or the payroll tax from 6.2 percent to 0.3 percent.
Applying the VAT broadly would be regressive, hitting a higher proportion of income for middle-class taxpayers than that for the wealthy, the report said. Targeted exemptions or refundable credits could help make the VAT more progressive, the report found.
A VAT could also have effects on how taxpayers spend their money. It does less to discourage investing and saving than a high corporate income tax, Toder and Rosenberg wrote. The U.S. rate is among the highest for industrialized countries.
EU VAT Compass 2011 / 2012
Encompassing the most important features of the European Union's VAT system, the EU VAT Compass 2011/2012 is an essential source of reference for all those actively working or interested in VAT. The book consists of three parts, each comprising a vital element of the European VAT system.
Currently over 150 nations utilize the VAT
It works like an export subsidy for foreign exporters and an import tariff at the same time, which places the U.S. in a comparatively most uncompetitive situation due to the fact that we do not utilize the VAT or any other countervailing measures.
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