Bangkok--20 Apr--Standard & Poor's
With the U.S. government trying to figure out ways to reduce the swelling federal deficit, revenue sources that have long been politically sensitive, such as the European-style value-added tax (VAT), seem to be on the table. In a new report titled "Credit FAQ: Does The U.S. Need A Value-Added Tax To Reduce Its Deficit?," Standard & Poor's Ratings Services' Chief Economist David Wyss discusses how the VAT works--it's basically a national sales tax on consumption rather than on income--and the potential for it being implemented in the U.S.
By some estimates, a 1% broad-based VAT in the U.S. could yield $1 trillion a decade, depending on which goods and services it includes. And that is a far lower rate than most countries that have a VAT have set. For instance, at 5%, Japan's consumption tax is among the lowest. Though never really used in the U.S. before--it was adopted in Michigan in 1975 but later repealed--economists and policymakers have debated it over the years as a way to reduce the federal deficit, finance entitlements such as Social Security and Medicare, and even replace corporate and personal income taxes.
The report is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
David Wyss, New York (1) 212-438-4952