Abstract and Keywords
This article addresses the question as to whether the United States may join many other central governments in enacting a national value-added taxes (VAT). The idea of a federal VAT, which in its final incidence operates like a national retail sales tax, is not new. The article reviews the performance of the current system of state and local retail sales taxes (RSTs) and compares this to what a “well-designed” consumption tax should look like (tax-base comprehensiveness, minimization of the taxation of intermediate products and services, destination-based taxation, and compliance and administrative costs). It concludes that state RSTs not only “fall well short” of meeting these policy goals, but also that their defects are not likely to be corrected.
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