The Washington Post ran a piece today about an “economic analysis” commissioned by the National Retail Federation (NRF) that seems to indicate that a VAT (a value added tax) would crush our economy. Oh wait. That’s the spin. The important bit is that the premise of the study was that a VAT would be added to the existing tax structure. Like that would *ever* happen.
But let’s humor them anyway. The study suggests that the implementation of a 10.3% VAT would “destroy” the economy and lead to a job loss of more than 850,000 jobs in the first year alone. The corresponding drop in Gross Domestic Production (GDP) in that year is estimated at .2%. The total of lost business in the first decade would be a whopping $2.5 trillion. Pretty intense numbers. If only they meant something.
The purpose of the study, according to NRF president Matthew Shay, is to push back against “a rising tide of interest in the VAT in Washington, where policymakers are eager to reduce record budget deficits.”
Agreed. The VAT is definitely the subject of some chatter in DC. But I haven’t heard one scenario – not one – even remotely close to the one painted here. Every VAT scheme/alternative that I’ve heard tossed about is premised on the idea that there would be some changes to the existing tax structure (at the most extreme, there have been suggestions that the VAT would completely replace the federal income tax system). Such a scenario would never get past Congress. So why base an entire economic analysis on that premise?
I get it. The NRF is trying to spook those in DC so that they run screaming from a VAT. They’re promising to send this study to Obama’s tax commission as a warning about what could happen… Not that they need one. This scenario, as painted by the NRF, where a VAT would just be tacked on would never happen. Never. Ever. Trust me.
