NRF Welcomes Emphasis on Spending Cuts Rather Than VAT in Deficit Commission Proposal
For Immediate Release
Contact: J. Craig Shearman (202) 626-8134
shearmanc@nrf.com
www.nrf.com/VAT
NRF Welcomes Emphasis on Spending Cuts Rather Than VAT in Deficit Commission Proposal
WASHINGTON, November 10, 2010 – The National Retail Federation welcomed the emphasis on government spending cuts and reform of the existing federal tax structure rather than creation of a European-style Value Added Tax or other major new tax in a proposal released today by the leaders of President Obama’s deficit reduction commission.
“This proposal appears to be a clear indication that a VAT will not be included in the deficit commission’s final recommendations,” NRF President and CEO Matthew Shay said. “This is good news for the U.S. economy and American families because a VAT would cost our nation hundreds of thousands of badly needed jobs and would lower the standard of living for most working Americans.
“We are grateful that the commission staff took the time to meet with us on this issue, and that Chairmen Bowles and Simpson appear to have recognized that a VAT would be a part of the problem, not part of the solution,” Shay said. “We look forward to seeing the final recommendations and trust that a VAT or any other form of consumption tax will not be included.”
The two co-chairs of the National Commission on Fiscal Responsibility and Reform, former Clinton White House Chief of Staff Erskine Bowles and former Republican Senator Alan Simpson, issued a 50-page proposal on ways to reduce the federal deficit following a closed-door meeting of the commission this morning. The proposal includes a variety of options to be considered by the full panel, which has a December 1 deadline to make recommendations to Congress. Details are available on the commission web site at www.fiscalcommission.gov.
A number of Washington policymakers, including Bowles, have spoken out in favor of a VAT in the past year, and Obama earlier told the commission that all options, including a VAT, should be considered.
NRF has long been concerned about the impact of a consumption tax on the economy, and earlier this year commissioned Ernst & Young and the economic research firm Tax Policy Advisers to conduct an in-depth analysis. The study, released last month, found that creation of an add-on VAT to reduce the deficit would result in the loss of 850,000 jobs in the first year, reduce gross domestic product for three years, and bring a permanent drop in retail spending totaling $2.5 trillion over the first 10 years. By contrast, the study found an equivalent cut in government spending would result in the creation of 250,000 jobs, GDP would grow, and less than one-fifth of the loss in spending would be seen.
NRF has worked extensively with members of Congress over the past year to explain the impact a VAT would have on the economy, and presented the study to the deficit commission’s staff last week.
The study, available at www.nrf.com/VAT, found that a 10.3 percent “narrow-based” VAT rate would be necessary to achieve deficit reduction goals while providing exemptions for necessities such as housing, groceries and health care, among others. At those rates, a VAT would cost taxpayers close to $400 billion annually. A family of four with an income of $70,000 would pay $2,400 in VAT taxes annually, a 100 percent increase over their current federal income tax payment.
As the world's largest retail trade association and the voice of retail worldwide, NRF's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 countries abroad. In the United States, NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2009 sales of $2.3 trillion. www.nrf.com
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