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Consumers Say VAT Would Curb Spending

Businesses across the United States could experience a drop in revenue if a proposed value-added tax (VAT) is implemented to reduce the federal deficit, a new survey suggests.

A majority of Americans (64 percent) said a VAT set at any percentage would impact their spending, particularly on eating out, clothing, accessories, groceries, entertainment and vacation travel, according to a recent survey of more than 5,000 consumers conducted by National Retail Federation (NRF). Ninety-two percent report they would curb spending if the government imposed a tax of 15 percent on all purchases.

If imposed, consumers would pay a VAT, which is a tax on retail sales, at the register. The tax would be a percentage of a consumer’s purchase, similar to a sales tax. Tax experts suggested the VAT in early 2009 during a White House press conference and since then a handful of Democrats, including President Obama, have argued a VAT should at least be considered

“These numbers are clear evidence of what common sense would tell even the most casual observer: If you tax spending at a time when the economy is still struggling to recover, consumers are going to spend less,” said Matthew Shay, NRF president and CEO in a prepared statement.

“With consumer spending representing two-thirds of the economy, a consumption tax – by VAT or any other name – is not the path to recovery or a prudent way to address the federal deficit. The deficit needs to be reduced, but a VAT is not the answer.”

Here’s a breakdown of where consumers surveyed would curb spending because of a VAT or federal sales tax:

- 83 percent: eating out
- 80: clothing or accessories
- 74: food/groceries
- 72: entertainment
- 72: vacation travel
- 63: automobile
- 59: prescription and over-the-counter medicines