Journal Article Effects of a Federal Value-Added Tax on State and Local Government Budgets
James R. Nunns, Eric Toder
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A longstanding concern of state and local governments is that a federal value-added tax (VAT) could severely limit their reliance on sales taxes as a major source of revenue. This concern is too narrowly focused; a federal VAT could affect revenues from other sources and spending more than sales tax receipts. These broader budgetary effects have received little attention, even though they are a direct consequence of how a VAT would affect incomes, relative prices, and the value of existing assets.
Please also see this report's supplement on short-run effects and appendix.
This article was originally published in the the September 2017 edition of the National Tax Journal.

Research Areas Taxes and budgets
Tags State and local tax issues
Policy Centers Urban-Brookings Tax Policy Center