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The majority of countries in the world have implemented a Value Added Tax (VAT) - sometimes called a Goods and Services Tax (GST) - why hasn't the US?

EDIT - I would assume that if a VAT were implemented it would replace sales tax and the like at least to some degree, not asking why we don't have another tax stacked on top of our current ones VAT

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    Perhaps it would be more practical to ask about arguments for such a tax. AFAIK there have been no real arguments against, because it's never been seriously considered. One argument, and perhaps the best, would be the problems involved in replacing one tax mechanism with another. – jamesqf Oct 26 '17 at 19:02
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    One could ask why other countries don't have sales taxes. – Todd Wilcox Oct 26 '17 at 23:30
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    One reason why other countries have VAT taxes is that they're generally waived/rebated for exports, making the country's products cheaper in international trade. And, contrary to statements that VAT is a "sales tax", it's actually closer to a corporate/business income tax, as it is collected from each business in the chain and is based on the company's gross profits. – Hot Licks Oct 26 '17 at 23:35
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    @jamesqf I've personally heard/read conservatives rail against it rather harshly a number of times. The most common argument I've heard is that it's too easy to raise because it's less visible. – jpmc26 Oct 27 '17 at 0:39
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    @HotLicks: Its based on "value added", not on gross profit. So if you just pass on something at cost, your VAT contribution is 0. – BradHards Oct 27 '17 at 1:19
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Liberal/bipartisan arguments against a VAT:

  1. Most states already have sales taxes and value added taxes (VATs) are essentially a tax on sales.
  2. VATs are regressive, as they tax consumption rather than income and the poor consume a larger portion of their income.
  3. While businesses pay VAT to the government, they collect the money from their customers. Liberals prefer taxes that they can claim come from businesses and their owners to ones on employees and customers.

Conservative/libertarian arguments against a VAT:

  1. A VAT reduces the value of savings, as part of the savings will be used to pay the VAT.
  2. A border-adjusted VAT is essentially a tax on imports, like a tariff.
  3. Countries with VATs tend to add them to existing taxes rather than replacing existing taxes with VATs. This leads to more taxes and spending.

United States specific reasons:

  1. Sales taxes are state taxes but a state could not charge a border-adjusted VAT due to constitutional limitations (states can't tax imports from other states). It would have to be a federal tax.
  2. The non-border-adjusted version taxes exports from one state to another. Most states do not want to do that, as it puts their goods at a competitive disadvantage with other states.
  3. Since sales taxes are state taxes and VAT is a federal tax, it would be complicated to reduce the (state) sales tax while imposing a federal VAT.
  4. Adding a federal law to raise taxes for a state is politically difficult. The politician gets the blame for the tax increase but doesn't get the credit for the spending. Politicians prefer the reverse, where they get the credit and someone else takes the blame. Or at least want to get the credit as well as the blame.
  5. Donald Trump thinks that it is too complicated.
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    "VATs are regressive, as they tax consumption rather than income and the poor consume a larger portion of their income." - VAT/GST can be targeted and have services lower income people depend on be exempt (transit, food, shelter) and generally gets applied to luxuries more than necessities. Though this ups the complexity a little though, but I generally do not hear VAT/GST as regressive because it can be exempted on products low income use more. – Twelfth Oct 26 '17 at 17:27
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    @phoog Please take it up with the Cato institute, as shown by the citation. And states can't charge sales tax on products produced elsewhere unless the seller has a local nexus. The problem with VAT is that the default is to tax on export; changing that to import is unconstitutional. – Brythan Oct 26 '17 at 17:33
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    @Brythan The Cato's institute's argument is exactly what phoo says: That holds for any tax. They just want to refute the argument that the VAT is less anti-savings than other taxes. (As they state in the article you conveniently linked.) – sgf Oct 26 '17 at 21:20
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    @MaciejPiechotka But making system that's 100% accurate would make it impractically complex. But still, for poor people that spend significant part of their income on food (reduced VAT rate) their effective VAT rate is lesser than for richer people spending money on goods and services with nominal VAT rate. Maybe with exception of crazy millionaires who buy nothing but caviar. – el.pescado Oct 27 '17 at 6:39
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    I find the "regressive" and "collect from customers" arguments a bit weak insofar as factually in places where you do have VAT, it's the conservatives who lower VAT and the liberals/socialists who raise them beyond reason. France during the last 5 years being the most compelling recent example where the reduced VAT rate doubled under Hollande, among them agricultural products, transports, and repair cost. – Damon Oct 27 '17 at 9:04
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One argument omitted from otherwise excellent answer by Brythan is that it - or rather, border adjustment tax that will probably accompany it - will possibly gut the retailers (especially cheap Wal-Mart type importers).

This is covered in a great detail (with specific math on how border adjustment effects work) in Vox's article "House Republicans are proposing a big corporate tax cut that Walmart hates":

That’s why retailers are revolting against the idea of border adjustment. As David French, the head lobbyist at the National Retail Federation, told Politico, “Our members have told us that the import tax could be as high as five times their profits. I don't know how viable some retailers would be in the face of this import tax."

Barney Jopson of the Financial Times reported, “Senior lobbyists who sometimes struggle to get the attention of company leaders told the Financial Times they were receiving calls from chief executives with orders to fight the tax plan, which some importers say threatens to wipe out their profits.” Walmart, Best Buy, Target, and Walgreens have all been meeting with Ways and Means Chair Brady’s office about the issue, according to Bloomberg BNA reporters Aaron Lorenzo and Kaustuv Basu.

Obviously, mostly this argument is made by importer retail industry - but it can be argued that it would have at least immediate negative impact on (frequently low income) consumers who depend on Wal-Marts of the country to buy cheap foreign-produced stuff.

protected by Philipp Oct 27 '17 at 12:52

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