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Monday, 17th May 2010

New Study Finds That a National Value-Added Tax Could Permit Major Cuts in Corporate Income Taxes, Payroll Taxes

New Study Finds That a National Value-Added Tax Could Permit Major Cuts in Corporate Income Taxes, Payroll Taxes
Source: New America Foundation

Does America need a VAT? The debate is heating up about whether the U.S. should join all other developed countries by adopting a federal value added tax (VAT). At the same time, many economists and public policy experts propose to stimulate growth by reducing America’s high corporate income and payroll taxes.

To clarify options for tax reform, the Economic Growth Program at the New America Foundation and the Urban-Brookings Tax Policy Center have released a groundbreaking new study that examines the possible use of a VAT to lower corporate income taxes, employer payroll taxes, or both in the hope of spurring growth in America’s stagnant economy. Among the findings of the authors, Eric Toder and Joseph Rosenberg, is this: a relatively low 5 % VAT with a narrow base from which many necessities are excluded could fund a reduction of the corporate income tax from 35% to 25.6% and a simultaneous reduction of the employer portion of the Social Security payroll tax from 6.2 % to 4.5%.

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