Pass a VAT; Lose Jobs
This weekend’s edition of Investors Business Daily (IBD) reports on a new study that warns “a value-added tax would kill 850,000 jobs in a year and cut retail spending by $2.5 trillion over 10 years.” According to the IBD editorial:
“An analysis for the National Retail Federation by Ernst & Young finds that adding a VAT to the U.S. tax system would reduce GDP for years, causing the loss of "850,000 jobs in the first year," plus "700,000 fewer jobs 10 years later."
“A VAT imposed in such a way would also cause retail spending to drop by almost $260 billion — or 5% — in the first year alone, according to the study. As a result, "most Americans over 21 years of age when the VAT is enacted would be worse off," and there would be "significant redistributional effects across generations, reducing real incomes and employment for current workers."
[ . . . ]
“The study comes at a time when President Obama's National Commission on Fiscal Responsibility and Reform may recommend a VAT when it announces its own ideas in December after the midterm congressional election is done.”
IBD also points out the report “also found that reducing the deficit by cutting government spending, rather than adopting a VAT, would mean more economic growth.”
Thankfully, as the IBD editorial also points out, in this year of the Tea Party Movement, spending restraint “has more resonance with voters than ever.” Exactly, what's needed is more economic growth, and that requires lower taxes and less regulation.