Proposed Value Added Taxes (VAT)

This all-inclusive tax includes services as well as the great range of items now covered by sales tax. It is not practiced here [yet] but the politicians keep reminding us of the possibility as a replacement of the Internal Revenue Code.

You know there will be both if it ever happens. This tax in foreign countries ranges from twelve to twenty-two percent [absolutely huge]. By added value, they cover even toll fees on the roads, exit fees to escape the country, and every service imaginable.

If you put a quarter in a parking meter you would need to add a nickel for the tax. Your gardener and housekeeper would be filing VAT tax returns on all the money they billed and collected because all labor is taxed. Houses are taxed when sold.

In countries where people are too poor to file tax returns, there is the VAT instead. Like all taxes, it is pervasive and invasive. It starts out cheap and grows like cancer. Like a new kind of sales tax, it gains breadth of scope and attains new heights.

This would be a federal tax. Remember that sales tax is a state tax so there would be both. They might even tax the sales tax with the VAT.

* Phillip B Chute is an Enrolled Agent, tested, licensed, and appointed by the IRS directly. He has prepared or supervised over 25,000 tax returns over 30 years.