Should the USA adopt a value-added tax?

Most countries in the world collect a border-adjusted value added tax; the USA does not.  In this document, posted on his blog, former US Senator Ernest F Hollings succinctly points out a problem this creates for American manufacturers: 

Our tax laws force off-shoring. You can manufacture a computer in Chicago, which requires an average corporate income tax of 27%. Exporting that computer to China, when it reaches Hong Kong, China adds another 17% value added tax. But if you manufacture a computer in China, the 17% VAT is rebated or cancelled as it leaves Hong Kong for Chicago. And when it reaches Chicago, there is no 27% add-on, making for a 44% penalty to produce in Chicago. Imagine a country where you can’t produce for a profit. Well, that’s Obama’s United States today.

Hollings is the last person you would expect to find online, but his blog is terrific.

Comments are closed.
%d bloggers like this: