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NRF Asks Congress Not to Use VAT to Fund Health Care Reform

For Immediate Release
Contact: J. Craig Shearman (202) 626-8134

NRF Asks Congress Not to Use VAT to Fund Health Care Reform

WASHINGTON, June 16, 2009 – The National Retail Federation today asked the House Ways and Means Committee not to consider a value added tax as a means of funding health care reform, saying a VAT would have a negative effect on the economy during the national recession.

“In the current economy, enactment of a direct tax on consumer spending would be devastating,” NRF Senior Vice President for Government Relations Steve Pfister said. “Consumer spending represents more than two-thirds of GDP but has plummeted dramatically over the past two years.  The current recession will not end until the consumer regains his footing.  Placing an additional tax on consumer spending would further depress spending, and lengthen and deepen the current recession.”

Pfister said a VAT “is a highly regressive tax, hitting lower and middle income taxpayers much harder than wealthier individuals,” and would also “greatly hurt” the 45 states that rely on sales tax as a major source of revenue.

“The enactment of a federal consumption tax would greatly crowd out the ability of the states to raise their own sales taxes at a time when they are desperately in need of revenue,” Pfister said.

Pfister’s comments came in a letter to Ways and Means Chairman Charles Rangel, D-N.Y., Ranking Member Dave Camp, R-Mich., and other members of the panel. News reports have indicated this week that Ways and Means is debating whether to use a single broad tax such as a VAT to pay for health care reform legislation under consideration by both the House and Senate, or to use a combination of smaller taxes. One estimate showed that a 5 percent VAT would generate $285 billion in annual revenue.

NRF has a long record of opposing any form of national consumption tax because of the impact on consumer spending, and Pfister said NRF would oppose a VAT regardless of whether it was used to fund health care or for other purposes.

The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail establishments, more than 24 million employees - about one in five American workers - and 2008 sales of $4.6 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com.