Using VAT for Jobs, Health and Retirement
The media debate about VAT has missed the mark. Strategically employed, VAT can legally promote and protect domestic production of anything mined, made, grown or serviced in any country. The question is not whether we have new taxes, high taxes or low taxes. The question is whether we have smart or dumb taxes in relation to promoting economic growth and international competitiveness.
VAT is a valuable tool used by 153 countries to gain a competitive edge in trade with the USA.
Americans simply look at VAT as a Value Added Tax on goods and services at each stage of production. In this narrow view, VAT is a consumption tax that is regressive. Overlooked is the strategic importance of VAT to international trade, domestic jobs and real wages if used intelligently.
The VAT becomes just like a tariff when the proceeds are used to subsidize production in any country competing with another. The average VAT worldwide is about 16%. The proceeds of VAT can be used like any tax in many ways. One way is to fund health care costs. This remains true whether or not the nation’s health care system is socialized or private.
Let’s look at a real world example of how this impacts my company—Revere Copper Products. Revere fabricates copper and brass products for further manufacturing and for building and construction markets. Revere has a health care plan for its employee owners. Imagine Revere workers on the factory floor producing a coil of copper. The price Revere sells it for must cover their wages and salaries plus the cost of metal, energy, equipment, materials and supplies as well as taxes and their own health care costs. When that Revere product is shipped abroad, the foreign country applies a VAT. Some of the proceeds of that VAT are used to help pay for the health care cost of the citizens of that country, not ours.