Should your state replace its sales tax with value-added tax?

[Damocles]

Value-added tax is a consumption tax levied on goods and services, which is assessed incrementally at each stage of production. The whole value of the tax is ultimately paid by the consumer, much like a sales tax - however, its mechanism relies on taxing the entire production chain for a given good or service, rather than incurring the entire tax at the point of sale.

Value-added tax is common in European, Latin American, Asian, and African countries. The most common method of levying value-added tax is through the credit-invoice method. The tax is levied at the point of sale, transactions are recorded by each business in the production chain, and refunds are claimed against value-added tax paid on input goods and services.

Proponents of implementing value-added tax argue that it would remove the incentive for vertical integration and corporate consolidation, because unlike a sales tax, the whole amount of the tax is not incurred against the item as it moves through the production chain. They also point to fraud prevention and incentives for businesses to claim the refunds, which leads to cross-checking and ease of auditing for tax authorities.

Opponents of implementing value-added tax argue that value-added tax, like excise taxes on certain goods and services, as well as sales tax in general, tends to have regressive economic effects. This is because consumption of goods and services does not necessarily rise as income increases, but some level of consumption is still required to obtain consumer products like food, fuel, et cetera.

Should your state replace its sales tax with a value-added tax?

[Big Abraham]

Hell no, and sales tax should be repealed too along with all regressive taxes which disproportionately burden consumers and especially low-income consumers.

[True Federalist (진정한 연방 주의자)]

The principal problem with switching to a value-added tax at the State level is the effect it could have on interstate commerce unless all States implement it.

Is there an example of a country that collects VAT at the subnational level, with rates that vary by region?

The technical problems are effectively none, but the economic side effects would seem to discourage it.  As it is, States that collect sales taxes, don't for out of State  sales, lest they encourage manufacturers or wholesalers with a multi-State customer base to go elsewhere.

[Mike88]

The principal problem with switching to a value-added tax at the State level is the effect it could have on interstate commerce unless all States implement it.

Is there an example of a country that collects VAT at the subnational level, with rates that vary by region?

The technical problems are effectively none, but the economic side effects would seem to discourage it.  As it is, States that collect sales taxes, don't for out of State  sales, lest they encourage manufacturers or wholesalers with a multi-State customer base to go elsewhere.

In Portugal, the VAT rates for Mainland Portugal, Azores and Madeira are different:

Normal rate: 23% Mainland, 22% Madeira, 18% Azores
Middle rate: 13% Mainland, 12% Madeira, 8% Azores
Low rate: 6% Mainland, 5% Madeira, 4% Azores

Info from here: http://www.deloitte-guiafiscal.com/iva/taxas-de-iva/

[AGA]

Hell no, and sales tax should be repealed too along with all regressive taxes which disproportionately burden consumers and especially low-income consumers.

How should Texas get tax revenue then?

[KaiserDave]

Hell no, and sales tax should be repealed too along with all regressive taxes which disproportionately burden consumers and especially low-income consumers.

This

Sales Taxes are terrible

[The Houstonian]

Hell no, and sales tax should be repealed too along with all regressive taxes which disproportionately burden consumers and especially low-income consumers.

How should Texas get tax revenue then?

A tax on high incomes.

[Dr. MB]

no because we don't have a sales tax 

[True Federalist (진정한 연방 주의자)]

The principal problem with switching to a value-added tax at the State level is the effect it could have on interstate commerce unless all States implement it.

Is there an example of a country that collects VAT at the subnational level, with rates that vary by region?

The technical problems are effectively none, but the economic side effects would seem to discourage it.  As it is, States that collect sales taxes, don't for out of State  sales, lest they encourage manufacturers or wholesalers with a multi-State customer base to go elsewhere.

In Portugal, the VAT rates for Mainland Portugal, Azores and Madeira are different:

Normal rate: 23% Mainland, 22% Madeira, 18% Azores
Middle rate: 13% Mainland, 12% Madeira, 8% Azores
Low rate: 6% Mainland, 5% Madeira, 4% Azores

Info from here: http://www.deloitte-guiafiscal.com/iva/taxas-de-iva/

Are those rates set by the regions or by the national government? Because island territories are often economically disadvantaged by their geography, taxes are sometimes lessened there to encourage industries other than tourism to locate there.

[DC Al Fine]

The principal problem with switching to a value-added tax at the State level is the effect it could have on interstate commerce unless all States implement it.

Is there an example of a country that collects VAT at the subnational level, with rates that vary by region?

Canada's VAT has a federal component of 5%, with provincial rates varying from 0% to 10%. They get around the issues you outlined by requiring that the VAT be charged at the customer's local rate rather than the vendor's. When I buy something, I'm indifferent (from a tax perspective at least), about whether the vendor is from low tax Alberta or high tax Nova Scotia because I'm getting charged Nova Scotia's 15% VAT either way.

[Mike88]

The principal problem with switching to a value-added tax at the State level is the effect it could have on interstate commerce unless all States implement it.

Is there an example of a country that collects VAT at the subnational level, with rates that vary by region?

The technical problems are effectively none, but the economic side effects would seem to discourage it.  As it is, States that collect sales taxes, don't for out of State  sales, lest they encourage manufacturers or wholesalers with a multi-State customer base to go elsewhere.

In Portugal, the VAT rates for Mainland Portugal, Azores and Madeira are different:

Normal rate: 23% Mainland, 22% Madeira, 18% Azores
Middle rate: 13% Mainland, 12% Madeira, 8% Azores
Low rate: 6% Mainland, 5% Madeira, 4% Azores

Info from here: http://www.deloitte-guiafiscal.com/iva/taxas-de-iva/

Are those rates set by the regions or by the national government? Because island territories are often economically disadvantaged by their geography, taxes are sometimes lessened there to encourage industries other than tourism to locate there.

Regional governments set the rates. On mainland Portugal it's the national government. Azores is much poorer than Madeira, Madeira is the 3rd richest region of the country, so it's predictable that taxes are a bit lower, However, corporate taxes are lower in Madeira, 14.7%, while in the Azores it's 16.8%. In mainland Portugal, the normal rate is 21%.

[Big Abraham]

Hell no, and sales tax should be repealed too along with all regressive taxes which disproportionately burden consumers and especially low-income consumers.

How should Texas get tax revenue then?

Graduated income tax, with exceptions for the lowest earners.

[John Dule]

If Democrats ran on the simple platform of "Stop taking money from poor people," I'd be much more inclined to identify with their party.

[Lechasseur]

Hell no, and sales tax should be repealed too along with all regressive taxes which disproportionately burden consumers and especially low-income consumers.

Eh, the VAT plays a big role in Europe being able to have nice things.

"Taxing the rich" may be necessary, but definitely isn't enough to finance those programs.

[Ferguson97]

Yes.

[Former President tack50]

The principal problem with switching to a value-added tax at the State level is the effect it could have on interstate commerce unless all States implement it.

Is there an example of a country that collects VAT at the subnational level, with rates that vary by region?

The technical problems are effectively none, but the economic side effects would seem to discourage it.  As it is, States that collect sales taxes, don't for out of State  sales, lest they encourage manufacturers or wholesalers with a multi-State customer base to go elsewhere.

In Portugal, the VAT rates for Mainland Portugal, Azores and Madeira are different:

Normal rate: 23% Mainland, 22% Madeira, 18% Azores
Middle rate: 13% Mainland, 12% Madeira, 8% Azores
Low rate: 6% Mainland, 5% Madeira, 4% Azores

Info from here: http://www.deloitte-guiafiscal.com/iva/taxas-de-iva/

Yeah, same thing happens here in Spain for the Canaries and Ceuta/Melilla (but interestingly not the Balearic Islands, who have the same VAT rates as mainland Spain).

Mainland: 21% normal / 10% Reduced / 4% Super reduced
Canaries:  7% normal / 3% Reduced / 0% Super reduced (there are also some niche "enlarged" rates)
Ceuta/Melilla: Too many rates to cover, but the normal one seems to be 4%

To be honest I think Spain (and Portugal) are really only able to pull this off because the islands are just too far from the mainland to be profitable to send stuff there; plus there are technically customs controls of various kinds between mainland Spain and the islands (tobacco and alcohol in particular are the kinds that are easiest to smuggle since tobacco can be twice as expensive in mainland Spain than it is in the islands).

And much like Portugal, the regional governments set the rates in the island territories; while the mainland's rate gets sent by the national government.

Back in 2010 this created a bit of a "West Lothian question" here, when a mainland VAT increase was only able to be passed thanks to the votes of centre-right Canarian nationalist CC, who would not be affected by said hike.

Meanwhile I don't think the US constitution would allow for customs controls between the states. I guess Hawaii, Alaska and the territories could pull off a state VAT, but I don't think any state in the mainland US could.

[Sprouts Farmers Market ✘]

Sales taxes aren't that bad once you you back out food and clothes like the sane states in the northeast do. They really ought to start exempting fast food (non-dine in) as well from sales tax since poorer people in particular do not often have as much time for meal preparation.

[Badger]

Hell no, and sales tax should be repealed too along with all regressive taxes which disproportionately burden consumers and especially low-income consumers.

This. In terms of regressivity, a VAT is the sales tax on steroids.