I was just in Montana at a conference on the Battle of the Little Bighorn, where Lt. Col. George Armstrong Custer's career came to an abrupt end in 1876, and noticed in the Big Sky State that they have no sales tax. Were they ever happy! They have no desire to see either a state sales tax or what is now being whispered about in Washington, D.C., the value added tax, or VAT. I am not an economist, but in the Army, I lived in Germany for 12 years, where they have a value added tax. The German word for this tax is Mehrwertsteuer; it was called a lot of other things as well, but these terms are unprintable in a family newspaper.

A value added tax taxes goods at each level where value is added. There are a lot of ways to run a value added tax; here is just one example. A Decatur farmer grows corn that he sells to an agribusiness for $1,000. Let's say the value added tax is set at 5 percent; our hardworking farmer thus has to pay $50 to the federal government. The agribusiness takes this corn, turns it into corn syrup and sells that syrup to a candy company for $5,000. Since the company gave $4,000 additional value to the product, they would owe the feds 5 percent of that, which is $200. The candy company takes this corn syrup, adds some additional items to it (chocolate, nuts, etc.) and turns that into $15,000 worth of candy bars. Since they added value to the product, they would need to pay Washington 5 percent of the $10,000 worth of value added, a tax payment of $500. At the register, you would pay 5 percent of the candy bar's price (a nickel if it costs a dollar), which the store would be required to send to the federal government. In some systems, the producers can file paperwork to get value added taxes back.

There are a lot of potential problems with this. First, this would be a federal value added tax; not one state or local tax would go away. Second, if producers get hit with a new tax, they are going to probably pass that on to you, the consumer, with higher prices somewhere. Third, the paperwork required to keep track of all this will be an added cost and a time-consuming effort. Finally, the government will have to decide what products should fall under this system and which ones won't. The Washington scuttlebutt is that a federal value added tax would be 2 percent or 3 percent, but if you take a lot of products off the list, such as food, they might have to raise the value added tax rate to 4 percent or 5 percent.

Then there are protected categories of people that won't have to pay value added tax. In the U.S. Army in Germany, we did not have to pay the value added tax if we took the sales receipt to a special tax office on base and got it stamped. Once we showed the stamped receipt to the German store owner, he would sell us the product minus the tax. The store owner would send these exemption forms to the government (due every month!). In Washington, they're discussing allowing some people (a family of four, for example, with a total annual income less than $33,000) not to pay any value added tax at the cash register, which could lead to all kinds of shenanigans; there is significant value added tax fraud in Germany. And if you exempt too many people from the tax, it would probably go up for everyone else, and producers might not be able to reclaim their tax paid.

But most worrisome about a value added tax is upward creep. Germany's value added tax was 16 percent in 2006; today, it is 19 percent, and who knows when it will climb higher.

Of course, the cavalry might ride to the rescue, and to help businesses do paperwork, the makers of TurboTax could come out with TurboVAT. But if the current secretary of the treasury, who is also in charge of the IRS, couldn't figure out TurboTax and, therefore, didn't pay what he owed for four years, how will he, or we, ever figure out a complex value added tax?

But we had better figure it out right now and discuss it fully before we implement such a federal value added tax, or we may end up like the 7th Cavalry did at the Little Bighorn.

French MacLean is a retired Army Colonel living in Decatur.