VAT Is Not The Answer

As politicians grapple with the issue of deficit reduction, some pundits such as The Atlantic Monthly’s Derek Thompson, and former chairman of the Federal Reserve, Paul Volcker, are floating the idea of a value added tax, or VAT, to help close the budget shortfall. The National Retail Federation commissioned a study of public opinion on the issue. The results of the research, conducted by polling firm, Big Research, in April and released by the NRF in late August, show a clear preference on the part of consumers to avoid new taxes.

Of those polled, 64 percent said a federal value added tax of any amount would affect their spending on items such as cars, homes, groceries, and medicines. If the government imposed a VAT of 15 percent and applied it to all purchases, 86 percent said their spending would be affected. Matthew Shay, president and CEO of the National Retail Federation, expresses strong opinions against a value added tax in a press release accompanying the survey results. “With consumer spending representing two-thirds of the economy, a consumption tax, by VAT or any other name, is not the path to recovery or a prudent way to address the federal deficit,” he says. “The deficit needs to be reduced, but a VAT is not the answer.”

How to reduce the deficit is a conundrum with which politicians and advocacy groups such as the NRF continue to grapple. The research asked respondents how they thought Congress should tackle the deficit, and only 18 percent chose raising or adding taxes as a solution. An overwhelming 82 percent said that the government should spend less, although the poll did not ask where cuts should be made.

According to the results, merchandise categories most affected by the implementation of a value added tax would include eating out (83 percent), clothing or accessories (80 percent), food and groceries (74 percent), entertainment (72 percent), and vacation travel (72 percent). The NRF offers more information and advocacy action items against a value added tax online at nrf.com/vat.

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