The United States still faces a major obstacle in international trade which most people simply know nothing about. This obstacle is the Value Added Tax (VAT) and it costs this economy hundreds of millions of dollars in extra fees every year. Making matters worse is the fact that over nearly 150 nations around the world use a VAT system to protect their economy while the United States remains idle.

The simple fact is that governments need money to operate, and they generate this revenue in many ways. In the United States our government operates only on funds generated through income and property taxation. The sales tax – a form of consumption tax – is marginal in the grand scheme. Most other countries put much more emphasis on consumption taxes like the VAT.

The VAT rewards exports while largely blocking imports. This guarantees domestic demand for domestically produced goods, thereby ensuring that the taxpaying citizens are gainfully employed.

U.S. companies, for example, can barely export to Europe because the VAT system makes American goods more expensive. At the same time European companies can export easily to the U.S. where there is almost no barrier to their goods.

TradeReform.org highlighted the Value Added Tax in a recent article discussing how important a VAT would be to U.S. financial stability. It would bring money into the government while also protecting American producers, consumers and workers. The VAT is hardly a cure-all for the endemic problems in the American economy, but in instituting such a system – the most profitable and successful form of taxation in the world – would go a long way to stabilizing the free-falling economy.

Whether you look at the VAT from the standpoint of a fair trade advocate or a fiscal conservative the conclusion is the same: America needs this or something like it. A Value Added Tax would promote American exports and discourage foreign imports – dependence on imports eventually leads to outsourcing and job loss. At the same time it could potentially help stabilize the federal deficit by bringing more revenue into the indebted system – it would at the same time promote job creation in the U.S., which would lead to even higher levels of income tax receipts.

The most important point to take away is that there are solutions available if our elected officials are willing to take the necessary steps. We do not have to watch as our economy crumbles, there are measures we can put in place to stabilize the situation. It is now a matter of political will.

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