The National Retail Federation says a value-added tax proposed to reduce the federal deficit could result in the loss of 850,000 jobs in the first yer, reduce gross domestic product for three years and bring a permanent drop in retail spending total $2.5 trillion during the first ten years.

The doom and gloom from the NRF stems from the value added tax – a rate of 10.3 percent – would reduce the federal deficit by 2 percent of GDP. The tax would cover most consumer goods and services, but exempt home sales, rent, groceries, medicine, health care, financial services.

“Supporters claim a VAT is the solution to the nation’s economic ills, but nothing could be further from the truth,” said NRF president and CEO Matthew Shay.

Calling the tax “regressive,” Shay said the poor, middle class and senior citizens would be faced with paying more for everyday necessities.

The study was conducted by Ernst and Young LLP and economic research firm Tax Policy advisers. While others examined replacement of the current federal tax system, the study is the first macroeconomic analysis of adding a VAT on top to the existing tax system.