Texas VAT Bill Would Threaten State’s Prosperity

By:  T. Dan Tolleson
03/26/2013
       
Texas VAT Bill Would Threaten State’s Prosperity

Texans have never experienced the economically depressing effects of a VAT, but once they realize what those effects would be, they will oppose any VAT in order to preserve their state’s prosperity.

Boasting the laudable goal of eliminating property taxes throughout the State of Texas, a recently filed Value-Added-Tax (VAT) bill — House Bill 3472 — would replace not only property taxes, but also business franchise taxes, a limited statewide sales tax, and various other local sales taxes with a VAT. Texans have never experienced the economically depressing effects of a VAT, but once they realize what those effects would be, they will oppose any VAT in order to preserve their state’s prosperity.

As reported by The New American, in 2009 and 2010 Democrats pushed for a national VAT to balance the federal budget and finance a massive expansion of unconstitutional federal spending. Some Republicans are willing to consider implementing a VAT, even though a VAT is “the most effective way to increase the size of government.” More coverage by The New American concerning the VAT can be found here, here, and here, pointing out the prodigious revenue-raising capacity of a VAT as well as the detrimental economic effects of a VAT. Many of these observations about the effects of a national VAT would also apply to the proposed Texas state VAT.

As of March 26, House Bill 3742 has no State Senate sponsor in the Texas State Legislature — a legislative requirement for passage through the Texas legislature — and no House co-sponsors among other Texas state representatives. But that could change overnight if the necessary sponsors materialize, thereby allowing the bill to move forward in the legislative process.

To pay for the statewide elimination of property taxes and other current state taxes, HB 3742 proposes astate VAT of seven percent (Sec. 220.104) that would apply generally to “any person who in this state supplies any service or property in the ordinary course of a trade or business in which the person engages for the purpose of profit” (Sec. 220.101), with a few exemptions carved out for governmental entities; religious, educational, and public service organizations; and very small businesses with taxable receipts of less than $100,000 in the preceding 12-month period (Sections 220.151—220.153). 

According to HB 3742, all businesses subject to the VAT would be required to submit to the Texas Comptroller a quarterly tax report that would include, among other calculations, “the aggregate output taxes [VAT charged to customers] and input taxes [the aggregate VAT already paid to all suppliers] that accrued during the preceding quarterly period” (Sec. 220.302). This excerpt gives the reader some idea of the complexity of the business bookkeeping — as well as the state governmental oversight — that would be required by the proposed VAT.

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