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The Economists' VoiceTop Economists Take On Today's Problems$
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Joseph Stiglitz, Aaron Edlin, and J. Bradford DeLong

Print publication date: 2011

Print ISBN-13: 9780231143653

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231143653.001.0001

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PRINTED FROM COLUMBIA SCHOLARSHIP ONLINE (www.columbia.universitypressscholarship.com). (c) Copyright University of Minnesota Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CUPSO for personal use.date: 24 September 2021

Tax Reform

Tax Reform

Time for a Plan C?

Chapter:
(p.153) Chapter 18 Tax Reform
Source:
The Economists' Voice
Author(s):

Michael J. Graetz

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231143653.003.0018

On November 1, 2005, the President's Advisory Panel on Tax Reform unanimously recommended two alternative plans: a simplified income tax (SIT) and a growth and investment tax (GIT). The panel considered plan C—a partial replacement of individual and corporate income taxes with a value-added tax (VAT), but although the panel found the VAT possibility worthwhile, it could not reach a consensus. This chapter argues that a more realistic way of achieving the broader tax base and lower tax rates would be to replace part of the revenue raised by taxes on personal and corporate income with a value-added tax. Using a VAT to replace much of the income tax has many advantages. It combines two of the world's most common tax mechanisms to exploit the United States' advantages as a low-tax country. A combined VAT and income tax system would make the United States quite similar to the average OECD country with regard to consumption taxes relative to GDP and tax rates on consumption.

Keywords:   income tax, tax policy, taxation, President's Advisory Panel on Tax Reform, tax system, simplified income tax, growth and investment tax, value-added tax

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