"The Get America Working! approach would work, in effect, by correcting a major price distortion. The current U.S. Internal Revenue Code taxes employment far more heavily than it does the use of natural resources. This distortion has grown progressively worse as payroll taxes have grown. Revising this distortion would increase employment, equity and overall economic vigor importantly. And it would do so by responding to market price signals, not through clumsy and expensive government interventions."
America Needs A VAT: A value-added tax would go a long way toward solving several of the country's fiscal and tax problems
Date:
Mon, 05/24/2010
Source:
L.A. Times
Editor's note: Because of the growing U.S. budget deficit the notion of a broad-based consumption tax like the value added tax (VAT) is getting much discussion in policy circles. Here, the authors argue for a tax shift -- collecting VAT taxes and using them to reduce "growth choking taxes, noting
...the case for adopting a federal VAT does not rest on deficit reduction alone. Even if overall tax receipts do not go up, a modest, sensitively framed VAT that reduces corporate income taxes and/or reduces payroll taxes has the potential to make the American tax system fairer and more efficient, as well as much friendlier to those enterprises that can most effectively resuscitate our broken economy right now.
A narrow-based VAT could ... serve to substantially reduce the employer portion of the payroll tax from its current level of 6.2%, which would stimulate businesses to start hiring again.
The op-ed draws on a new study from the Tax Policy Center, "Impacts of Imposing a VAT to Replace Payroll Taxes or Corporate Taxes" at: http://www.taxpolicycenter.org/UploadedPDF/412062_VAT.pdf."
