Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Below is a list of reasons to seriously consider instituting a Value Added Tax (VAT) in the United States.
- Current monetary/fiscal instability is a significant economic and security threat to the nation
- National reluctance to cut spending programs
- Only a financial emergency will force spending cuts
- Absent such a national emergency nothing will force spending and entitlement cuts
- Apply the VAT revenue only to deficit reduction
- A VAT would allow a lowering of corporate taxes that currently hamper business expansion and the repatriation of international profits
- Everybody pays the VAT, which ends the favouritism implicit in income taxation
- A VAT would end the hash legislators have made of allowable deductions and special interest group privileges, the stock and trade of Washington
- A VAT would end the uncertainty that stems from anticipated/future tax policy that currently hampers investment
- The current tax system is beyond complicated and actually hampers industry by being too expensive to comply with
- The current tax system no longer provides sufficient income for the government to function and even after program and entitlement cuts will likely not furnish sufficient revenue to support the national government
- An easily understood VAT is not a job killer as are income and other taxes, especially hidden taxes
- A VAT is an obvious tax, which makes governments reluctant to raise it, thus forcing government to live within its means
- Over the last few decades government deficits have grown even in good economic times, which belies the notion that the current deficit is temporary
- Constant government expansion and ever growing deficits put increasing pressure on interest rates and impede capital formation thus penalizing investment leading to the malaise of perpetually weak economic performance
- A VAT by taxing all aspects of production at the same rate does not favour labour intensive production at the expense of capital intensive production thus rendering taxation fairer over the whole spectrum of industries
- Because corporations are taxed uniformly over the entire spectrum of production they can focus on the most efficient systems of production as opposed to concentrating on taxation skewed efficiencies, which in the long run turn into inefficiencies
- Corporate taxes tend to render capital more expensive and labour less expensive, which skews production to labour
- The inefficient use of inputs penalizes society as a whole in that it reduces overall output rendering that output dearer than it should be
- Currently the US faces a balance of payments disadvantage from nations that have a VAT tax as the price of goods made for export by such nations is reduced by the amount of the VAT whereas all the taxes included in the price of US goods made for export is carried in the price as a factor of production
- Weak economies produce lower revenues for government and higher spending commitments which prolongs recessionary periods and delays recovery—a VAT would stabilize the government sector thereby shortening recessionary periods
If I have time today I will try to summarize the arguments against a VAT, which I have started, but have not taken very far as of this writing.