What form, and rate, might a U.S. value-added tax take here?
Both are wide open. House Democrats who cite it as an option to pay for expanded health care have talked about a VAT rate of 1.5% or more, with housing, education, financial services and medical care potentially exempt. Dubay says he can’t see it gaining the necessary political support unless clothing, food, medicine and housing are exempted. Liberal policy expert Len Burman, who until recently was co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, has proposed a 25% VAT that could pay for health care reform and balance the budget. Under the plan, millions of families would be exempt from income taxes and the top income tax rate would be cut to 25%. That overhaul may be too ambitious in this fractious political environment. Q: So how likely is a VAT to be adopted? A: It’s unlikely in the short term and anyone’s guess beyond that. It could become a big issue after midterm elections in 2010 if rising deficits increase the urgency f
