Is a National Value-Added Tax On the Way?
July 22, 2005
Is the President’s Tax Reform Panel preparing to recommend some form of a value-added tax? At least some experts are starting to think so. From Business Week:
Most U.S. trading partners have a value-added tax. Supporters say that if the U.S. adopts one, it might attract more international investment and tax multinationals in a less complicated way. Backers also believe that shifting to a VAT would be much simpler for individuals, since most would no longer have to fill out tax forms.
One version, which is being promoted by Michael J. Graetz, a Yale Law School professor and former top Treasury Dept. official, would set a VAT rate at roughly 14% of the cost of every product. That would produce enough tax revenue to fund a cut in corporate income tax rates from 35% to 20%.
Graetz would keep the personal income tax, but he would set a single rate of 25% and get rid of many current deductions.
For some idea of what a nationwide VAT tax might look like, check out Chris Atkins and Curtis Dubay’s Fiscal Fact on the only state-level VAT in the United States.
Was this page helpful to you?
The Tax Foundation works hard to provide insightful tax policy analysis. Our work depends on support from members of the public like you. Would you consider contributing to our work?Contribute to the Tax Foundation
Let us know how we can better serve you!
We work hard to make our analysis as useful as possible. Would you consider telling us more about how we can do better?Give Us Feedback