A value-added tax (VAT) is an indirect tax on consumption (see Section 2.3). A VAT is levied against businesses whenever value is added to a product and when the product is sold. So, ultimately, the VAT is passed on to the consumer. For instance, a company that builds a tablet computer in a country with a VAT. The company pays a VAT on each part that it buys to produce the tablet computer. When the company sells the tablet computer to a retailer, the retailer pays a VAT on the tablet computer. Finally, when a consumer buys the tablet computer from the retailer, the price includes all VATs collected earlier.
Many European and other developed countries use a VAT. In Canada, the VAT is called the Goods and Services Tax. The tax is used to provide revenue for the federal government. Essential goods and services, such as groceries, prescriptions, and medical services, are exempt from the tax. Technically, exempt items are taxed at 0% and are referred to as "zero-rated supplies."
Gregory Mankiw has an economics blog in which he records observations and advice. If you would like to read more from Mankiw, visit his blog.
Here is a sample answer for each argument.
For the bill:
I would vote for an additional sales tax on sugary sodas and juice drinks. This tax could help reduce obesity while raising money for health programs. The tax should not apply to bottled water, diet sodas, coffee, tea, or milk.
Against the bill:
I would vote against an additional sales tax on soda. Taxing food does not change long-term behaviors with respect to appropriate food choices. It takes lifestyle changes and education. An additional tax could also jeopardize jobs in the beverage industry.
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