WHEREAS:

The Value-Added Tax (VAT) is essentially a national sales tax. Like all taxes on consumption, it is regressive, taking a larger portion of the income of poor and working Americans than that of the rich. Even exempting necessities such as food, housing and medical care from the VAT would not overcome its harmful effect on poor and working people; and

WHEREAS:

The federal government is interested in the VAT as a means to pay for huge federal breaks to wealthy people and corporations. It is most unfair to cause a deficit by granting a massive tax cut to the rich, and then pay the debt by levying a regressive consumption tax on poor and middle-class Americans; and

WHEREAS:

A national consumption tax would directly compete with state sales taxes, hindering states' ability to raise revenues as needed. Tax revolts have already limited the ability of state governments to raise revenues from the property tax and income tax. A VAT could push public tolerance for state sales taxes to the limit, crippling states' ability to raise revenues on their own, at a time that increasing service demands and falling federal aid are already squeezing state budgets; and

WHEREAS:

The VAT is another "supply-side" economic policy designed to fuel economic growth by increasing savings and business investment. AFSCME has learned the hard way that Reaganomics supply-side policies do not work. To date, they have actually brought the national savings rate to historic lows, instead of highs. Business investment under the first four years of supply-side policies dropped by half from the previous four years' rate. Supply-side policies like the VAT hurt instead of help the economy; and

WHEREAS:

It is argued that VAT would help improve the US. trade deficit, especially if revenues are used to provide even more cuts to corporations. There are two big problems with these arguments. First, a VAT is paid for by the consumer, so it has no effect on international competitiveness. Second, making poor and working Americans not only pay for the budget deficit but provide more breaks for wealthy corporations is not tolerable; and

WHEREAS:

The introduction of the VAT, an entirely new federal tax, would be vastly expensive and complicated. The U.S. Treasury estimates it would take 18 months and 20,000 employees to implement the tax, and $700 million per year to enforce. The Treasury Department itself concluded that the advantages of the VAT are not sufficient to warrant the expenditure; and

WHEREAS:

Despite its apparent disadvantages, the Value-Added Tax continues to be proposed by both conservative and liberal economists and elected officials as a new source of federal revenue.

THEREFORE BE IT RESOLVED:

That AFSCME will vigorously oppose regressive value-added and related consumption taxes as a source of federal tax revenues.

SUBMITTED BY:

International Executive Board