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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, July 26, 2011

House Holds Hearing Today on Tax Reform and Consumption-Based Tax Systems

House Logo The House Ways & Means Committee holds a hearing today on Tax Reform and Consumption-Based Tax Systems:

The hearing will consider separately two different consumption tax models. One panel will examine the advantages and disadvantages of a VAT, whether as a supplement to or full replacement for existing taxes. Another panel will discuss the policy arguments for and against adopting the FairTax as a replacement for existing federal taxes. The hearing will explore the economic impact of consumption tax systems, as well as issues surrounding administration and compliance.

Fair Tax Panel:
  • Bruce Bartlett (Columnist, Tax Notes, The Fiscal Times, The New York Times)
  • Mike Huckabee (former Governor of Arkansas)
  • Laurence J. Kotlikoff (Professor, Boston University), accompanied by David Tuerck (Professor, Suffolk University))
Value Added Tax Panel:
  • Rosanne Altshuler (Professor, Rutgers University)
  • Robert J. Carroll (Ernst & Young)
  • Michael J. Graetz (Professor, Columbia University)
  • Simon Johnson (Professor, Massachusetts Institute of Technology)
  • Daniel J. Mitchell (Senior Fellow, Cato Institute)
  • Jim White (Director Tax Issues, Government Accountability Office)

Congressional News, Tax | Permalink

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Awesome news. But.. I fear we're too entrenched and too many people have much to lose (ie. politicians losing their taxing 'might') to switch to something like the fair tax. Best we can hope for is a Reaganite simplification.

And do we really need to copy the horrible Euro VAT model?

Posted by: tbflowers | Jul 26, 2011 4:35:16 AM

Dammit, the only 'fair tax' is no tax at all. Beyond that any tax (income, property, consumption, excise) at any schedule will be unfair - it will fall equally only on persons who follow exactly the same trajectory through life.
The two words 'fair' and 'tax' simply do not belong in any context together.

Posted by: rick shuey | Jul 26, 2011 5:39:28 AM

I was hoping to see Robert Frank's name on the list. His progressive personal consumption tax is superior to either the fair tax or to a VAT. It taxes consumption rather than work, and it's progressive. It works like the income tax with withholding, but the eventual tax is based on what you consume each year, computed as (income - net savings). The more you spend the higher your rate. Under a certain level you pay no tax.

Posted by: Larry | Jul 26, 2011 6:11:15 AM

Consumption tax, fair tax, national sales tax, value added tax? They are all "The Tony Soprano Full Employment Bill".
When the taxes, like dutys get too high, it pays to smuggle or to steal.
A bunch of really dumb ideas.

Posted by: Milo | Jul 26, 2011 8:09:48 AM

Ooooo ... a tax panel discussing changes. lol

How many ^&*%ing decades have we been listening to this disingenuous blather? Don't hold your breath waiting for Republicans to do anything about the tax structure.

Posted by: John | Jul 26, 2011 2:53:33 PM

While I prefer a consumption tax I fear tax reform.
If we get a complete overhaul, we would get whichever scheme allows the most political meddling and hidden charges and exemptions. So a VAT.

In addition it will never be a complete replacement, but an addition to. Without a Constitutional Amendment, there is not way D.C. will give up it's powers to tax.

To Larry: If the scheme you like relies on reported income, it will fail as badly as the current system does. There are too many ways to hide income, especially for the wealthy. While sales of goods can be hidden, it is more difficult, plus there are fewer points of enforcement, (retail sales points) than there are for income (employees). And those that collect and forward a sales tax, (businesses), are already keeping accounts to start with, so the extra book-keeping is nowhere near as much of a burden on them as it is on Joe office worker or Mrs. Retiree.

But without a complete replacement, the chances of mischief on the part of D.C. are beyond 100%.

Of the two, I prefer the Fair Tax, though the rebate part seems too tricky. If you want to help the poor, just do not tax the 'necessities of life', things like raw food, similar to the way N.J. runs it's sales tax. Flour is not taxed. Hostess Twinkies, made with flour, are taxed.

Then dump the whole rebate thing. Too many ways for it to be abused by politicos.

Posted by: tomwright | Jul 26, 2011 2:56:44 PM

Uh, John Linder? Neil Boortz?

Posted by: Andrew | Jul 26, 2011 4:06:53 PM

I like the fair tax, but the key point is that we need a consumption tax. Its the only way that government regulation can be held in check. When the pols go to far on the regulation front and they start to put a drag on the economy, it reduces the governments rake. Sort of a check and balance.

Posted by: wilky | Jul 26, 2011 8:48:57 PM


No tax can be perfect, but pct eliminates a lot of lobbying (esp if you get rid of the corporate income tax too, which is paid by investors and employees, not "corporations") The problem with our current system isn't enforcement particularly, but rather bad incentives and unbearable complexity. I'm sure pct will gradually erode in ways I can't predict, but that will take time. The "new broom sweeps clean" effect can be quite powerful, too. Remember that earning more income doesn't burden society in any significant way. As Scott observes, consuming more does (less for everybody else.)

Posted by: Larry | Jul 28, 2011 2:36:03 PM