7 reasons a VAT is a dicey proposition

March 29, 2010

My guy Pete Davis over at Capital Gains and Games unsheathes the katana and slices up the VAT. Not so easy to implement he says. A brief summary of his reasons (though read the whole thing, of course):

1. Like the U.K. when it adopted its VAT in 1973, the U.S. will struggle for at least two years and probably longer to implement a VAT.

2. Compared to our income tax, the VAT is regressive.

3. Tax reformers lambast the complexity of our income tax with good reason, but somehow assume that the same people who legislated that complexity will legislate a clean VAT.

4. I can’t think of a faster way to kill Rust Belt jobs than to impose a VAT.

5. Housing would be hurt by a VAT even if it is zero rated.

6. Exporters would benefit from a VAT, but that benefit would be partially offset to the extent that the dollar appreciated against the currencies of our trading partners.

7. State government sales tax revenues would be directly impacted by a federal VAT.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/