Changing the Federal Tax Philosophy: A National Value-Added Tax or Retail Sales Tax?

16 Pages Posted: 23 Dec 2003

See all articles by John L. Mikesell

John L. Mikesell

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Abstract

Moving the federal government from its heavy reliance on taxes on income and profits to taxes on general consumption has been proposed as a way to improve equity, economic efficiency, and transparency of the tax system. The value-added tax and the retail sales tax offer economically equivalent approaches to general consumption taxation, differing only in how they are administered. A comparison of the two taxes as they now operate, however, suggests considerable advantage for the value-added tax as a national revenue source. Only in terms of requiring fewer businesses to collect the tax is there an advantage to the retail sales tax. The value-added tax is superior or equivalent to the retail sales tax in other important fiscal criteria.

Suggested Citation

Mikesell, John L., Changing the Federal Tax Philosophy: A National Value-Added Tax or Retail Sales Tax?. Available at SSRN: https://ssrn.com/abstract=468242

John L. Mikesell (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States
812-855-0732 (Phone)
812-877-7802 (Fax)

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