“Why not the VAT?”
To the Editor:
Some people who would like to replace our Income Tax with a—much fairer- consumption tax, suggest the VAT. After all, the Value Added Tax is very common in Europe and the usual system of taxation in most advanced nations of the world. So shouldn’t the U.S. adopt a tried and tested system rather than introduce a totally innovative—revolutionary some would say-system such as the FairTax (FT)? After all, both are consumption taxes, true. But there the similarity ends. Let us make three comparisons:
1. VAT— At each step of production and manufacturing, the various merchants (businesses) increase the cost to cover the taxes they owe. The final price (which includes all the increases) is paid by you—the consumer.
FT— There is no business-to-business tax. (Goodbye paperwork!) The end product is taxed once by the retailer and paid once by you—the consumer.
2. VAT— is a hidden tax
FT— is printed right on the sales receipt. (Transparency)
3. VAT— Easy to increase, almost without anyone noticing. Presently the highest VAT is levied in Hungary where it constitutes 27 percent of the final price.
FT— Hard to increase: The FT bill HR-25 specifies 23 percent. To increase the FT above 23 percent would take an Act of Congress. Also, it would increase the taxes of every single consumer in the U.S. (Quite a challenge for Congress).
Now that you understand the difference between the VAT and the FT, which do you like better?
Carroll B. Simpson
Printed in the January 24, 2013 edition.