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Coalition Warns Against US VAT

by Mike Godfrey,, Washington

11 December 2009

The Center for Freedom and Prosperity (CF&P) Foundation, joined by 21 free-market and taxpayer groups, has sent a letter warning President Obama, Treasury Secretary Timothy Geithner and top Congressional leaders about the "fiscal and economic risks" of a value-added tax (VAT) in the US.

The Coalition for Tax Competition letter is in response to a growing push for the implementation of a VAT in the US in order to raise more tax revenue.

The coalition argues that there has been a "failed history" of VATs being applied in Europe and suggests that such taxes have traditionally been associated with large increases in the overall tax burden and level of government spending.

The letter concludes that "the United States should not repeat the mistakes of Europe … bigger government and higher taxes would mean sluggish economic performance and lower living standards."

"VAT's have historically resulted in massive increases in the overall fiscal burden," said Andrew F. Quinlan, President of the CF&P Foundation. "The massive expansion of government in Europe over the last thirty years was made possible in large part by the VAT."

Dan Mitchell, a fiscal policy expert at the Cato Institute, remarked: "The interest groups and politicians pushing for the value-added tax want a new tax to finance more government spending."

Grover Norquist, President, Americans for Tax Reform, a member of the coalition, cautioned: "Unless we want to end up with the economic stagnation of Western Europe, we have to avoid a VAT at all costs."

Talking on the subject of tax reform on PBS's Charlie Rose show in October, House Speaker Nancy Pelosi, a California Democrat, said that "somewhere along the way, a value-added tax plays into this," before going on to add: "Of course, we want to take down the health-care cost, that's one part of it. But in the scheme of things, I think it's fair to look at a value-added tax as well."

John Podesta, an Obama advisor, has also suggested that VAT is worth looking at, in a "small and progressive" way.

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