Comparing the average OECD tax structure with that of the United States.
This report examines the effects of imposing a new value added tax (VAT) in the United States and using the revenue raised to lower payroll tax and corporate income tax rates.
Comparing the average OECD tax structure with that of the United States.
This report examines the effects of imposing a new value added tax (VAT) in the United States and using the revenue raised to lower payroll tax and corporate income tax rates. We summarize how different forms of VAT operate and compare how a VAT, payroll tax, and corporate income treat different sources of income and the different ways each tax distort economic decision-making.
We then present estimates of the revenue effects from a VAT and the reduction in payroll and corporate income taxes that a VAT could potentially finance. We examine several prototype VAT bases, including a broad tax base on just under 80 percent of consumption and a narrower tax base on about 50 percent of consumption that reduces adverse impacts on low-income households by exempting housing, food consumed at home, and medical expenses, other than those already financed by government. We also examine an alternative in which a broad VAT base is combined with a per-capita refundable