Home / Knowledge / News / Study says VAT would cause loss of 850,000 jobs
Study says VAT would cause loss of 850,000 jobs
Oct '10
Creation of a European-style Value Added Tax being proposed by some Washington policymakers to reduce the federal 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, according to a comprehensive new economic analysis conducted for the National Retail Federation.

“Supporters claim a VAT is the solution to the nation's economic ills, but nothing could be further from the truth,” NRF President and CEO Matthew Shay said. “This study shows that imposing a VAT means everyday necessities would cost more, the poor, middle class and senior citizens would be forced to make do with less, and hundreds of thousands of people who have jobs today would find themselves out of work. Clearly, a VAT would be part of the problem, not part of the solution.”

“This report has found that a VAT would have negative economic consequences for most working Americans alive today,” Shay said. “If Congress wants to reduce the deficit, the solution is to cut spending, not to create a new tax.”

NRF released The Macroeconomic Effects of an Add-on Value Added Tax, conducted by Ernst and Young LLP and economic research firm Tax Policy Advisers. While others have examined replacement of the current federal tax system, the study is the first macroeconomic analysis of adding a VAT on top of the existing tax system as currently being discussed in Washington. NRF will submit the study to President Obama's deficit reduction commission for consideration as the panel prepares recommendations for Congress.

“In the face of an economy that continues to struggle, immediate enactment of an add-on VAT would pose serious risks,” the 60-page report said. “The drop in retail spending, jobs and GDP under an add-on VAT has the potential to further weaken the economy in the near term rather than strengthen it. Other countries have reduced, not increased, their VATs in the face of the recent economic downturn. Reducing the deficit through lower government spending would have much more favorable economic effects – more jobs, higher GDP, and a less depressing effect on retail spending – in both the near term and in the longer term.”

The study found that cuts in government spending could reduce the deficit without the negative effects of a VAT.

According to the study, an add-on VAT – which would drive up consumer prices and correspondingly reduce real income – would reduce retail spending by 5 percent in the first year, or $257 billion. The number would taper off to 3.7 percent after 10 years, but the loss would be permanent, and would amount to $2.5 trillion over the next decade. By contrast, reducing government spending would bring only a 0.7 percent initial drop in retail spending.

Total employment – including all industries, not just retail – would drop by 850,000 jobs in the first year under an add-on VAT and would remain down by 700,000 jobs for decades to come, the study found. GDP would initially drop 0.2 percent, would take four years to return to pre-enactment levels, and after 10 years would be up by only 0.3 percent. Under reduced government spending, 250,000 jobs would be created rather than lost, while GDP would grow 0.1 percent in the first year and 0.7 percent in the 10th year.

Must ReadView All

Textiles | On 20th Jul 2017

Provide safety net for cotton growers: Congress to Trump

A bipartisan Congressional coalition has called attention of...

Courtesy: ITMF

Textiles | On 20th Jul 2017

ITMF'17 themed on tech, trade, climate in disruptive times

The International Textile Manufacturers Federation (ITMF), an...

Textiles | On 20th Jul 2017

RIL’s Q1 FY18 petrochemicals revenue up 22.9% y-o-y

Reliance Industries Limited (RIL) has reported its financial...

Interviews View All

Hannah Lane

Encouragement from brands will motivate supply chains to become more...

Shawn Honeycutt
Bolger & O'Hearn

‘The Indian market is interesting and rather persistent in seeking new...

Kamlesh Vaghela
RK Textiles

Very few machinery manufacturers have R&D units

Giorgio Mantovani
Corman S.p.A

Giorgio Mantovani, MD of Corman, with a presence in both Milano and New...

Marcel Alberts

Coating at a fibre level is a practice not usually seen in the...

Mark Paterson
Technical Absorbents Ltd

Mark Paterson, R&D manager of Technical Absorbents Ltd talks about Super...

Aditi Somani
Aditi Somani

Aditi Somani specialises in luxury fusion wear with international cuts and ...

Yash P. Kotak
Bombay Hemp Company

One of the directors of Bombay Hemp Company, Yash P. Kotak, speaks to...

Madhu Jain
Madhu Jain

She grew up in the walled city of Old Delhi, completed her studies, and...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


Letter To Editor

(Max. 8000 char.)

Search Companies


July 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category

Related Categories:

Planning to Take the Leap towards

Do you see sustainability as a route to business growth?

Yes No

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes No

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Thanks for your valuable feedback. Claim your free latest sustainability e-book.

E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search