VAT Is Far More Burdenensome
June 3, 2009 by Charlie
Filed under About the FairTax
A VAT and a sales tax are two different forms of consumption taxes. However, as has been pointed out, a VAT is far more burdensome (and costly) to administer. I forwarded the annual report of the Taxpayer Advocate’s Office within the past week or so. Their leading conclusion is that excessive complexity is an enormous burden on taxpayers. This proposal seems to be saying: “If you think the current system is complex, wait until you see what I have in mind for tax reform”. Rest assured, if European VATs are complex and administratively burdensome, a US VAT would be exponentially greater in that regard. Think: “European VAT on steroids”.
I don’t know how to compare the economic impact of a 10% VAT with adding the same amount to the income tax. What I do know is that increasing the total tax burden by that amount would be highly detrimental to the overall health of the economy, regardless of whether it is in the form of a VAT or an income tax. That is in direct contrast to the FairTax, which is revenue neutral (when measured statically) but would tremendously affect the efficiency of the economy and reduce the drag of the tax system.
Phil Hinson

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