Research Report Creating an American Value-Added Tax
Benjamin H. Harris, William G. Gale
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In this chapter, we propose a value-added tax (VAT) to contribute to the U.S. fiscal solution. A 5 percent broad-based VAT, paired with subsidies to offset the regressive impacts, could raise about 1 percent of GDP per year. International experience suggests that the VAT can raise substantial revenue, is administrable, and is minimally harmful to economic growth. Additionally, a properly designed VAT might help the states deal with their own fiscal issues. Although a VAT would be regressive relative to current income, this regressivity can be easily offset by transfers that would make the net burden progressive.
Research Areas Taxes and budgets
Tags Individual taxes Federal budget and economy Campaigns, proposals, and reforms Federal tax issues and reform proposals
Policy Centers Urban-Brookings Tax Policy Center