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Study says VAT would cause loss of 850,000 jobs

14 Oct '10
4 min read

Calculations were based on modeling a “narrow-based” VAT with a rate of 10.3 percent, which would reduce the annual federal deficit by 2 percent of GDP. Similar to VATs in Europe, the narrow-based VAT would cover most consumer goods and services but home sales, rent, groceries, medicine, health care, financial services and education would be exempted to ease the regressive impact on low-income families. Based on total personal consumption expenditures of $10 trillion in 2009, the VAT would cost taxpayers close to $400 billion annually.

The study said a VAT is inherently regressive, and that provisions to lessen the impact on the poor increase the burden on the middle-class. A family of four with an income of $70,000 would pay $2,400 in VAT taxes annually, a 100 percent increase over their current federal income tax payment.

National Retail Federation

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