I was not aware at all that there is a real, existing proposal to introduce a real VAT in a U.S. state. Luckily T. Dan Tolleson highlighted this development by writing a commentary on Texas House Bill 3742 in “The New American”. To be fair, it is more a rant than a commentary. And a simple Wikipedia search for VAT would have been so helpful for him. Or just a brief glance at the various postings in the VAT Blog. Hey, if he’d sent me an email I’d be happy to discuss VAT!
The writer is helplessly entangled in the misunderstanding that VAT is a cost of business in every part of the supply chain. And that VAT therefore a “hidden” tax is, charged from the manufacturer to the distributor and from the distributor to the retailer, without any visibility to the end consumer. Mr. Tolleson, that is not true! If you want VAT to be visible to the end consumer, just let him take a look at the VAT line on the receipts he receives from the cashier! Exactly the same as with sales tax – there is no difference. Actually, from the perspective of the end consumer, there is no difference at all between a VAT and a retail sales tax. If you want VAT to be added on top of the net amount, by all means design a VAT law that requires the same.
The odd thing though is that Mr Tolleson has been working for “Americans for Fair Taxation” - a group that aims to replace the income tax with a national sales tax. So he should know at least something about VAT…
All this aside, what a great initiative of Representative George Lavender to throw out all the petty indirect taxes (certain state sales, use, excise, franchise, severance, production, occupations, gross receipts and inheritance taxes, as well as certain local sales, use, excise and ad valorem property taxes) and introduce a real VAT at a low rate. Australia did that at the time of the introduction of their GST (which is basically the same as VAT). It works!
Texas House Bill 3742 is here: http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=83R&Bill=HB3742
You will have seen my a-typical posting earlier this month “VAT = Passive Aggressive Tax?”, with comments along the same line.
Watch this space for updates.
See here for the commentary in the New American: Texas VAT Bill Would Threaten State’s Prosperity.