How a Value Added Tax Would Work, Talking Tomatoes and Ketchup

By Features FOXBusiness

Since the U.S. doesn't use this system at the moment, we look abroad to the VAT gods – Europeans -- for an example.  As a very simple exercise, we’ll apply this tax system to the tomato and ketchup industries because, c'mon, who doesn't like ketchup?

Continue Reading Below

Let's say a tomato farmer sells tomatoes to Heinz for $10,000; it's a lot of tomatoes. Now, if the U.S. VAT rate was, say, 10%, the tomato farmer would charge Heinz a total of $11,000. That's $10,000 plus a $1,000 tax. The farmer would then pay that tax to the government. Sorry, Old MacDonald, you don't get to keep that money.

Click here to view the entire slideshow.

What do you think?

Click the button below to comment on this article.