Actual state and local sales taxes diverge dramatically from the popular and textbook vision of the tax. One major flaw is the exclusion of a wide range of consumer services from taxation, which renders the consumer tax base much narrower than the textbook description suggests. The other crucial...

In the inaugural issue of Marginal Impact last June, I criticized state and local sales taxes for taxing a significant number of business purchases. Even as I said that sales taxes were overboard along that dimension, I also observed that they were overly narrow along another dimension, because...

In previous articles, I examined two typical features of state and local retail sales taxes that prevent them from functioning as comprehensive taxes on consumption: the taxation of business purchases and the exemption of consumer services. In this article, I examine another feature, the...

A VAT would avoid the saving disincentives and resulting economic inefficiency imposed by income taxation, but its introduction could fuel spending growth, particularly if an income tax was also retained. Several issues would have to be resolved before a VAT could be adopted in the United States

The federal government confronts a long-run fiscal imbalance arising from the rapid projected growth of Medicare, Medicaid, and Social Security spending compared with revenue. The enactment of a value added tax is often mentioned as a possible solution to this imbalance. This article is the...

In the first article of this series, I considered the proper treatment of state governments under a hypothetical federal value added tax. In this article, I extend that analysis. As in the first article, I assume that a federal VAT should maintain neutrality between goods provided by the private...

The collection of use tax on interstate mail-order and Internet sales is a long-standing tax policy issue. Purchasers rarely pay use tax, and current constitutional doctrine prevents a state from requiring use tax collection by sellers without a physical presence in the state. In the last few...

On December 11, 2014, Senate Finance Committee member Benjamin L. Cardin, D-Md., introduced S. 3005, the Progressive Consumption Tax Act of 2014, which calls for the adoption of a 10 percent VAT. The adoption of a VAT would have far-reaching effects on the economy, including the Social Security...

Two 2016 Republican presidential candidates — Sens. Ted Cruz, R-Texas, and Rand Paul, R-Ky. — have proposed replacing much of the federal tax system with a VAT. Cruz's proposed VAT would have a 16 percent tax-inclusive rate, and Paul's proposed VAT would have a 14.5 percent tax-inclusive...