The Value Added Tax: Impacts on Florida

As the United States faces a record federal budget deficit forecast, policy makers are considering imposing a federal Value Added Tax (VAT). Lawmakers, however, have overlooked the negative impact of the VAT on state governments. A VAT would lower overall economic growth, decreasing both federal and state tax revenue, and would compete for a tax base already tapped by existing state sales taxes. This would particularly harm states like Florida that rely disproportionately on state sales tax revenues.