The Value-added Tax: Exploring Whether Spain's Vat Could Work in the United States

Open Access
Bower, Vanessa Amber
Area of Honors:
Bachelor of Science
Document Type:
Thesis Supervisors:
  • Orie Edwin Barron, Thesis Supervisor
  • Orie Edwin Barron, Honors Advisor
  • Sajay Samuel, Faculty Reader
  • VAT
  • value-added tax
  • tax
  • Spain
  • Accounting
The United States currently faces rising deficits and a large and looming national debt. Speculation abounds on whether rating agencies will downgrade the US from its coveted top rating due to questions regarding the sustainability of the current fiscal policy. There are many different theories and proposals circulating to address this issue, and one of them is to implement a European-style value-added tax (VAT). In order to maintain the current level of governmental spending, and ideally to pay for a reduction of national debt as well, it is evident that additional tax revenue must be raised, and value-added taxes have had much success in raising significant revenue for governments all around the world. The purpose of this thesis is to explore the research question “Would Spain’s value added tax system work in the United States?” This text contains an overview of the particulars surrounding a value-added tax, including its history, the basic concepts, an example, the possible calculation and administration methods, its benefits, and its drawbacks. There are several reasons a value-added tax is seen as attractive for the US, and these are presented and explored. Also explored are the various barriers to implementation that exist. Particular attention is paid to the general perceptions regarding value-added taxes in the United States, and the prevalent fear that implementing a value-added tax would lead to a larger and more spendthrift government. Finally, a conclusion is presented - while there are many positives associated with a possible U.S. VAT, the numerous barriers to implementation are likely to impede a VAT, especially until such a time that the popular perceptions of the tax become more favorable.