By Arnold Kling
A federal VAT is the best way to raise net new revenue to pay for tax reform and deficit reduction at the same time.
Thinking along similar lines, I write
What I propose is that we adopt a value-added tax (VAT), also known as a consumption tax, in addition to the other taxes, while adopting a rule that says no single tax may have a double-digit marginal rate. My thinking is that with this reform, we would have all four taxes — personal income, corporate income, payroll, and VAT, each at a rate of, say, 8 percent.
My view is that real fiscal reform needs to focus on reducing the political incentives to spend and to create tax exemptions. A commitment to low rates would help both.
UPDATE: see also Tyler Cowen.
For Discussion. Could legislators commit to low rates, or would there be a time inconsistency problem?