Is a State VAT the Answer? What’s the Question?

I argue in this paper that state value-added tax is more likely to be the right way to tax sales at the state level than seems to be recognized in most current US discussion. As Canadian experience demonstrates, a state VAT is both better in principle than even the best state retail sales tax (RST) and should be not much more difficult to administer in practice at the state level. A principal reason why states should consider VAT as a possible replacement for an RST is to make themselves more competitive by removing the present distorting and undesirable tax on business imposed through RSTs.