The Value-Added Tax: Key to Deficit Reduction?

By Charles E. McLure Jr.; Mark A. Bloomfield | Go to book overview

5
Alternative Revenue Sources

Several sources of revenue from indirect taxation, in addition to the value-added tax, have been mentioned prominently in recent months, primarily in the context of income tax reform, as a means of avoiding the large increases in corporate tax liabilities that would otherwise be necessary to finance substantial reductions in income taxes paid by individuals. Concern with deficit reduction could once again bring several of these taxes to congressional attention as alternatives to a federal VAT. This chapter discusses several of these alternative revenue sources: an oil import fee, a tax on all imported and domestic oil, a tax on all sources of energy, a tax on gasoline—or, more accurately, on all motor fuels—and an increase in excise taxes and tariffs. 1 The discussion of the VAT is deliberately quite brief; it merely summarizes the major points of the discussion of chapters 4 and 6.

The criteria used to assess these taxes are economic neutrality, international competitiveness, distributional equity or fairness, and administrative feasibility. The discussion of international competitiveness, fairness, and administrative simplicity probably requires little introduction; those concepts should be clear from context. The merits of economic neutrality are briefly discussed in chapter 4.


Oil Import Fee

An oil import fee has little to recommend it beyond administrative feasibility. 2 Since virtually all imported oil comes into the country either in large tankers or through a limited number of major pipelines, implementing an oil import fee should be fairly simple and straightforward. Moreover, such a fee could be employed to yield a moderate amount of revenue fairly quickly. It is unlikely that a major contribution to deficit reduction could be financed in this way, however.

The distortionary effects of an oil import fee could be quite

-60-

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The Value-Added Tax: Key to Deficit Reduction?
Table of contents

Table of contents

  • The Value-Added Tax - Key to Deficit Reduction? *
  • Contents *
  • Foreword xi
  • Summary 1
  • 1: Introduction 3
  • 2: The Need for a Value-Added Tax 10
  • 3: The Nature and Base of the Value-Added Tax 15
  • 4: Economic Effects 28
  • 5: Alternative Revenue Sources 60
  • 6: Issues in the Design of a Value-Added Tax 71
  • 7: Alternative Forms of General Sales Tax 103
  • 8: Problem Industries and Activities 115
  • 9: Intergovernmental Issues 152
  • 10: Conclusions 160
  • Commentary Mark A. Bloomfield 165
  • Index 181
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