Value-Added Tax and Pre-bate
Engine: Engine 1
Framing
The United States is the only OECD country without a federal Value-Added Tax (VAT) — a consumption tax collected at every stage of production where value is added, with the cumulative tax ultimately borne by the final purchaser. The Accord introduces a 10% standard VAT and a 15% luxury rate applied to the portion of purchases above category-specific thresholds, coupled to a universal monthly Pre-bate that neutralizes the burden on basic consumption.
The canonical parameters
Standard VAT rate: 10%
Luxury VAT rate: 15% (on portion above category-specific thresholds, set by Expert Board)
Universal Pre-bate: approximately $290/adult/month ($3,480/year)
Exemptions: none (no food exemption, no medical exemption, no carve-outs)
Delivery: monthly to FedCard automatically
The luxury tier
The 15% rate applies only to the portion of a purchase above category-specific thresholds. Examples: the value of a motor vehicle sale above $100,000; the value of a wristwatch sale above $2,000; the value of a yacht sale above $100,000. The first $100,000 of a $180,000 car is taxed at 10%; the $80,000 above threshold is taxed at 15%. The luxury rate is imposed at point of retail sale rather than within the value chain. Categories, thresholds, and periodic adjustment are set by Expert Board on a published methodology.
Why no exemptions
Exemption-laden VAT systems (food, medicine, children's clothing) produce lower revenue, higher administrative complexity, and regressive outcomes when exempt categories are consumed by wealthy households (organic produce, boutique pharmacies, designer children's clothing). The universal Pre-bate is the superior offset mechanism — it delivers cash to every adult regardless of what they consume, removing the regressivity of the consumption base without surrendering revenue to category carve-outs.
Revenue impact
At 10% on the US VAT base, VAT produces approximately $1.6-1.8T in gross revenue. Pre-bate consumes approximately $1.0T (about $290/month × 12 months × 290 million adults). Net: approximately $600-800B. Luxury-tier revenue modestly additive. Detailed calculations are in the workbook's Revenue_Streams tab.