I have seen some talk about implementing a Value Added Tax in the US. The VAT taxes at each stage of the production process.  The manufacturer pays a VAT, the wholesaler pays a VAT, the retailer pays  a VAT and the consumer pays a VAT. The final price  of a product includes the VAT.  I have seen the VAT in other countries and sometimes I even remember to send in the forms to get my tourist refund. The major issue with a national VAT in the US is that it will require a constitutional amendment to implement and I don’t see that happening.

On general principle I don’t want the VAT to cover Food, Health, Shelter or Education (once the item  is identified as such- we don’t know the lumber is part of a shelter until it actually goes into a shelter. Food is interesting – is it going to a food prep service (reseller) or to a final consumer?  Everything else, services and goods, can be covered by the VAT, although I suppose an argument can be made that Newspapers should also be exempt, but they will be extinct soon enough.

But if that unlikely event does happen, how does that work with the state taxes? If the national VAT is 20%, would goods in NH sell with a 20% premium and goods in NJ sell at + 27% and Chicago at +31%? I favor  the idea of making a flat national VAT  and splitting 50% of the take with the local jurisdictions. The States, Cities, Counties and RTAs can figure out how to split it up. And what about all those excise taxes and surtaxes? Those hotel users have to pay more than their share.

One of the side benefits of a VAT is the option to get rid of the penny. If posted prices include VAT, the retailers can set their prices to nice round numbers and we won’t need pennies anymore. Hooray!