CTC Letter Against a Value-Added Tax

The Center for Freedom and Prosperity Foundation, joined by 21 of the country’s most influential free-market and taxpayer groups, has sent a letter warning President Obama, Treasury Secretary Timothy Geithner and top Congressional leaders “about the fiscal and economic risks of a value-added tax (VAT).”

The Coalition for Tax Competition letter is in response to a growing push for the implementation of a VAT in the United States.  The letter examines the failed history of VAT’s in Europe and finds that VAT’s have traditionally been associated with large increases in the overall tax burden and level of government spending. The letter concludes that ” the United States should not repeat the mistakes of Europe…bigger government and higher taxes would mean sluggish economic performance and lower living standards.”

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December 4, 2009

The President
The White House
1600 Pennsylvania Ave.
Washington, D.C. 20500

Dear Mr. President:

We write today to you to warn about the fiscal and economic risks of a value-added tax (VAT).  American workers, consumers and taxpayers would all suffer if a VAT was added on top of the current income tax. By increasing the amount of money flowing to Washington, a VAT would facilitate an increase in the burden of government spending. A VAT also would serve as an excuse for higher tax rates on personal income and corporate income because of Washington’s myopic focus on distributional issues.

The evidence from Europe is not encouraging. Following the enactment of VATs beginning in the late 1960s, Europe has suffered big increases in overall tax burdens, up from 27.7 percent of GDP in 1965 to 38.9 percent of economic output according to the latest data. Government spending levels also have risen, from 30.1 percent of GDP in 1965 to 47.1 percent. Even taxes on income and profits have become more burdensome, climbing from 8.8 percent of GDP in 1965 to 13.8 percent.

The United States should not repeat the mistakes of Europe. Bigger government and higher taxes would mean sluggish economic performance and lower living standards.

Sincerely,

Andrew F. Quinlan ~ President, Center for Freedom and Prosperity Foundation
Grover Norquist ~ President, Americans for Tax Reform
Duane Parde ~ President, National Taxpayers Union
Matt Kibbe ~ President, FreedomWorks
Karen Kerrigan ~ President & CEO, Small Business and Entrepreneurship Council
David A. Keene ~ Chairman, American Conservative Union
Michelle Bernard ~ President and CEO, Independent Women’s Forum
Tim Phillips ~ President, Americans for Prosperity
Clyde Wayne Crews ~ Vice President for Policy, Competitive Enterprise Institute
Tom Giovanetti ~ President, Institute for Policy Innovation
Tom Schatz ~ President, Council for Citizens Against Government Waste
Terrence Scanlon ~ President, Capital Research Center
Stephen J. Entin ~ President, Institute for Research on the Economics of Taxation
Lew Uhler ~ President, National Tax Limitation Committee
Andrew Langer ~ President, The Institute for Liberty
Tom McClusky ~ Senior Vice President, FRC Action
Jim Martin ~ President, 60 Plus Association
Chris Chocola ~ President, Club for Growth
Robert E. Bauman ~ Legal Counsel, The Sovereign Society
Lawrence J. McQuillan ~ Director, Bus. and Econ. Studies, Pacific Research Institute
Rick Durham ~ President, Tennessee Tax Revolt
Roland Boucher ~ Chairman, United Californians for Tax Reform
Chuck Muth ~ President, Citizen Outreach

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