Retailers Try to Head Off Value-Added Tax
Retailers have long opposed value-added tax (VAT) proposals believing that
the imposition of such fees would negatively affect consumer purchasing and
ultimately the health of the industry.
Now, the Retail Industry Leaders Association (RILA) has gone on record
as being against a proposed VAT that would help pay for proposed healthcare
reforms.
Katherine Lugar, executive vice president, public affairs for RILA, who
wrote to Nancy Pelosi, the speaker of the U.S. House of Representatives,
said a VAT (AKA sales tax) would be “highly regressive and pose particular
harm for low- and middle-income consumers who spend a higher percentage of
their earnings on basic necessities such as food, clothing, and household
products.”
Ms. Lugar added, “With the nation’s economy showing some signs of recovery
and the holiday shopping season right around the corner, the last thing this
country – our businesses and our consumers – needs is a new supplementary
tax system that will increase retail prices and threaten American jobs.”
Discussion Questions: Does a value-added tax make sense in place of all
or some of the federal income tax? Is there any scenario where you could
see the retail industry getting behind a VAT?
I don’t think anyone would want VAT. I’ve got a good accountant that has found all the loopholes to help keep my taxes as low as possible. With the money I spend on business and personal expenses, there is no way I’m going to be better off financially if a VAT is put in place.
My fear is our nation will turn into a huge black market economy as consumers will do anything to avoid the tax.
The whole point of the VAT suggestion is to close those loopholes David is talking about. Clearly, to fund the long-term consequences of all of the bailouts, and the wars, and healthcare some form of tax increase will be mandatory. In fact, taxes will have to increase even if healthcare doesn’t pass. The impact of the wars in Iraq and Afghanistan alone would necessitate some increase. The question is, is VAT the best answer? Don’t know, but letting the affluent dodge taxes isn’t the answer either.
Unfortunately, I think Livingston’s black market economy is growing quite strong. Will the VAT be applied at flea markets, garage sales…eBay?
Assuming it could get past David’s issue(s) (which at this point occupy 100% of the comments!) we’d have practical concerns such as: would it replace the PIT or be in addition to it? Would some items (food, etc) be exempt? Etc. Obviously an ‘in addition to’ tax would depress spending (since there’d be less income available), but I think the whole thing is a blind alley.
I think VAT is a non-starter. It’s too regressive, too upfront and too “European” to have a shot here.
Clearly, we’re going to wind up with some form of tax increase, probably a complicated amalgamation of rollbacks and new taxes that hit middle class consumers obliquely rather than directly.
Bravo Ryan! The VAT is not about raising taxes, it’s about getting past the boom and bust years of income tax and the myriad of loopholes enjoyed by those fortunate enough to have savvy accountants. The country needs to consider every option and hopefully will settle on one that causes everyone to be a little upset. That’s the hallmark of good legislation on controversial issues.
I had to check “Other,” as I needed “Check all that apply.” The VAT has been repeatedly raised in Washington for 40 years. It has been pushed back by cooler heads who have pointed to the very clear fact that:
A VAT is a tax on the transfer of goods and services that is borne by the CONSUMER.
This tax is regressive in that it will put a greater pressure on consumers who can least afford it, it will be cumbersome to administer (more government workers to check, and added work for retailers and manufacturers), it will slow job growth, push sales into adjoining “black market” positions, and will create its own set of “protests” from special interest groups who will seek protection–food, electronic, technology, automotive, etc.
RILA and the NRF would do well to raise the voice of doubt on this issue loudly and early to push Representatives, like Pelosi, and Senators, like Conrad, to back off this foolish position.
VAT has been very successful in Canada. The tax has lowered their deficit substantially in just a few years and has not made Canadian products uncompetitive in world markets.
I would have to think that a VAT would be dead on arrival. The association world will come out against any proposal like this for political reasons, but they’re battling a concept that nobody will get behind.
Actually, I think the real upside of VAT, at least as it’s imposed in the EU, is job creation. The people who sit in offices somewhere debating the minutiae of ingredients/components of an item and who is likely to buy it must be very very dedicated souls. Possibly reviled, as well, by some. Just hark back to the recent debate over whether Quavers (an extruded potato-based snack) are crisps (chips) or vegetables.
In response to Jennifer’s remark that it is too “European”, let me respond by saying how confusing I find it to shop in the US when the price on a label is NEVER the price at the checkout. The variations of additional sales taxes from one place to another defeat me every time.
And as to David’s comments–sure, some people will always do their damnedest to find loopholes and avoid paying taxes but think about it. This is a tax paid by people who buy things on what they are buying. People who do not buy those items don’t have to look very far for ways to avoid paying it–just put the item back on the shelf.
Jennifer’s comment is very telling about this country and likely true. “VAT is a non-starter… [because it’s] too European.” Unfortunately, there is a sense in this country that we are different and we can do it better.
With the healthcare issue, we ignore that fact that there are over a dozen countries that have successful healthcare programs. We don’t even want to take their best ideas and implement them.
For years the U.S. automakers totally ignored the progress that foreign makers were making and knowingly fought against implementing systems, processes and products that these other makers were successful with. We can go through a list of industries and find the exact same scenario.
The VAT makes ultimate sense. Forget about its being regressive. That is easily fixed with rebates for lower-income people. It would cut the cost of tax collection dramatically. It would cut the cost of individuals paying their taxes dramatically. And, it should not raise prices.
U.S. companies (without the massive lists of loopholes) pay about 35% of their income for taxes. That is only about 3.5% on sales. You are just moving the “Taxes Paid” line from the bottom of the P&L to the top. Don’t think corporate income tax is a free ride for the citizens. Corporate income tax is paid by everyone who buys a product or service. It is already part of the price.
The biggest negative financial impact a VAT would have is to put a lot of tax accountants and IRS agents out of work. The VAT is simple. The alternative we have is the most convoluted system in the world. The only reason any company, retailer or otherwise, would fight this is because they rely so much on the tax avoidance provided legitimately by the current tax code.
A value-added tax would primarily negatively affect the mass of consumers simply because it is a new tax which will be continually raised.