The Tax Debate is All Wrong

vat

When we sign so-called “free trade” agreements with other countries, we agree to lower our tariffs and allow their goods into our country free of charge. The vast majority of these countries have a VAT, however. This means that although they may remove their tariffs and duties, American manufacturers still have a VAT of 10 or maybe 20 percent tacked on to the price of their goods. These American companies have already paid taxes in the United States, and this double taxation means that American goods cost more overseas while our market is flooded with cheap goods. These foreign companies receive a rebate on the VAT from their government when they export, allowing them to be even more competitive in the United States. For the rest of the world, the VAT has become the new tariff against the United States.

Our lack of a VAT is hurting the American economy across the board. Nearly all of our major trading partners have one;  Canada (5 percent), China (17 percent), Mexico (16 percent), Japan (5 percent), Germany (19 percent), the United Kingdom (20 percent), South Korea (10 percent), France (19.6 percent), Taiwan (5 percent), and Brazil (ranges from 5-25 percent) each carry a VAT.

Some say that  VAT is regressive and would hurt the poor, but that does not have to be the case. Through exemptions for things like children’s clothing, food, and medicine a VAT can become a valuable feature of any equitable society.

We need a way to fix the deficit and reign in the national debt, and a VAT can help to increase revenue while actually helping the economy to grow. Economists such as Pat Choate and politicians like former Senator Fritz Hollings have touted the ability of a VAT to increase revenue. In 2010 a VAT would have brought in $505 billion dollars more than our current system while helping to level the playing field for our productive industries.

Our representatives need to realize our present tax system is not only ineffective, it is terribly counterproductive and places us in a most uncompetitive condition. It must be changed immediately as a VAT will take in more money but be painless. There is no doubt that a VAT could work here, we just need leaders who are smart enough to implement one.

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