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Paul Simon on Tax Reform


Consider a VAT value-added tax

There is currently much discussion around Capitol Hill about radically changing the US tax system. However, sweeping changes should be entered into cautiously. We need stability in our tax laws and regulations. Uncertainty harms our economy and discourages investment.

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.

Source: The Dollar Crisis, p.111-112 Jul 2, 1996

Consider a VAT value-added tax

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.

Source: The Dollar Crisis, p.111-112 Jul 2, 1996

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