VAT is a consumption tax that will be much more regressive than people think. Basically a sales tax, it encourages people to save money, and that will be much easier for those with larger percentages of disposable income. It discourages purchasing, which will dampen retail business, while soaking those who can least afford it — the working and middle classes. The wealthy will simply curtail consumption and wait for a more propitious moment to spend.
How does that square with Barack Obama’s pledge that people making under $250,000 a year won’t see “one dime” in increased taxation? He already broke that pledge with higher cigarette taxes, but this would hit broadly across the entire spectrum of American voters. Every time they bought something, the voters will be reminded of that broken pledge.
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