Tax Foundation introduces VAT calculator

Several sources have told The Hill that adding a VAT to the current tax code is being discussed as one way of controlling the deficit. These sources say the VAT would likely be in addition to the taxes that are already paid. 

“Any proposal to adopt a VAT is a political hot potato,” said Tax Foundation senior economist Gerald Prante in prepared remarks. “Because U.S. fiscal problems are so serious, enacting a VAT without other tax-and-spending reforms could not close the deficit unless the VAT rate was quite high. The potential impact of such a tax is enormous, and Americans can get a sense of it in just a few minutes with the Tax Foundation’s new VAT calculator.”

Many industrialized countries use VATs, and the rates in OECD countries range from 5 to 25 percent. The economic crisis in the European Union has prompted some countries there to raise their VAT rates. Currently, EU members are required to impose a VAT of at least 15 percent, according to the Tax Foundation.