The National Retail Federation is urging the House Ways and Means Committee not to consider a value added tax (VAT) as a means of funding healthcare reform. A VAT, according to the NRF, would have a negative effect on the economy. "In the current economy, enactment of a direct tax on consumer spending would be devastating," Steve Pfister, SVP of government relations for NRF, said. "Consumer spending represents more than two thirds of GDP, but has plummeted dramatically over the past two years."

"The current recession will not end until the consumer regains his footing," Pfister continued in a letter to the committee. "Placing an additional tax on consumer spending would further depress spending, and lengthen and deepen the current recession." Pfister called a VAT, "a highly regressive tax, hitting lower and middle income taxpayers much harder than wealthier individuals." It would also, "greatly hurt," the 45 states that rely on sales tax as a major source of revenue.

"The enactment of a federal consumption tax would greatly crowd out the ability of the states to raise their own sales taxes at a time when they are desperately in need of revenue," Pfister pointed out. News reports have indicated that Ways and Means is debating whether to use a single broad tax, such as a VAT to pay for healthcare reform legislation under consideration by both the House and Senate, or to use a combination of smaller taxes. One estimate showed that a five percent VAT would generate $285 billion in annual revenue.

NRF has a long record of opposing any form of national consumption tax because of the impact on consumer spending, and Pfister said NRF would oppose a VAT, regardless of whether it was used to fund healthcare or for other purposes