One plan worth considering is a value-added tax (VAT), which collects a small percentage at each point in the manufacturing process. The VAT does not apply to sales outside the country. An advantage of this tax is that it is relatively easy to collect, and it encourages our exports, which means more jobs for the US. Another advantage of the VAT is that it taxes consumption rather than savings. There seems to be growing support for a consumption-based tax system. Presumably, a VAT would partially or substantially replace the income tax.
The disadvantage of the VAT is that it is regressive, but there are ways to compensate for that. The VAT should be closely analyzed in connection with any plan to reform our tax system.
The disadvantage of the VAT is that it is regressive, but there are ways to compensate for that. The VAT should be closely analyzed in connection with any plan to reform our tax system.