Sunday, July 31, 2005
Stewart Karlinsky (San Jose State), Dale Pinto (Curtin University) & Jeff Pope (Curtin University) have published Top 10 Myths of a Consumption Tax System, 108 Tax Notes 453 (July 25, 2005), also available on the Tax Analysts web site as Doc 2005-15201, 2005 TNT 142-31. Here is the abstract:
Much of the recent tax policy literature and political rhetoric suggests that moving to a consumption tax (value added tax, goods and services tax, national sales tax, income minus investments) would be simpler, and less expensive to administer and comply with. Therefore, according to the rhetoric, the United States should drastically overhaul its tax system and repeal the income tax as we know it and substitute a consumption tax like a VAT or a GST that our trading partners are subject to. What those positions fail to mention is that our trading partners have a higher compliance and administrative cost than we do, and they have both an income tax (corporate and individual) and a VAT. Interestingly, Jeffrey Owens, OECD tax commissioner, who has the advantage of worldwide perspective on various tax systems, has observed that "there is no crisis (in the U.S. tax system), but lots of room for improvement."
This article will discuss the top 10 myths regarding a consumption tax system to give readers, legislators, and tax policymakers an understanding of the issues that may arise if the United States moves to a substitute or complementary consumption tax system.