Tags: Retail | Group | Value-Added | Tax | Cost | 850 | 000

Retail Group: Value-Added Tax Could Cost 850,000 Jobs

Thursday, 14 Oct 2010 08:31 AM

The biggest U.S. retail lobby, trying to squelch talk of a national value-added tax, estimated on Wednesday that such a tax could crimp consumer retail spending by $2.5 trillion over the next 10 years.

That reduced spending could hurt gross domestic product, and some 850,000 jobs could be lost in the first year of the tax, said the National Retail Federation report, which was prepared by Ernst & Young and Tax Policy Advisers LLC.

The study assumed a narrow-based VAT of 10.3 percent that could reduce the federal budget deficit by 2 percent.

The concept of a consumption tax, or VAT, has been mentioned by some policy experts as a possible way to reduce yawning budget deficits that have approached 10 percent of GDP in recent years, though few lawmakers in Congress back the idea at this point.

The potential VAT studied in the report would be in addition to applicable state and federal tax.

Just last month, the Organisation for Economic Cooperation and Development noted that the slow recovery from recession in the United States meant that deficit reduction would be gradual. It suggested that savings could rise and deficits be cut through a federal VAT.

The Obama administration has appointed a bipartisan commission to examine how to reduce deficits to sustainable levels, and it is due to report on December 1. Many observers doubt whether the 18-member panel will be able to reach consensus on the painful choices needed to bring deficits down to a sustainable level of 3 percent of GDP.

Some 91 percent of Americans say it is crucial or important for Congress to tackle the deficit in 2011, according to a Reuters/Ipsos survey released on October 13.

According to the NRF study, most adult Americans would be "worse off" under a VAT, due to lower wages and less consumption, while retail spending subject to the tax would fall by nearly $260 billion in the first year of the tax.

"The drop in retail spending, jobs, and GDP under an add-on VAT has the potential to further weaken the economy in the near term, rather than strengthen it," said the report, which advocates deficit reduction through lower government spending.

© 2017 Thomson/Reuters. All rights reserved.

   
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The biggest U.S. retail lobby, trying to squelch talk of a national value-added tax, estimated on Wednesday that such a tax could crimp consumer retail spending by $2.5 trillion over the next 10 years. That reduced spending could hurt gross domestic product, and some...
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2010-31-14
Thursday, 14 Oct 2010 08:31 AM
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