Charles McLure's monograph is an excellent discussion of the advantages and disadvantages of a value-added tax (VAT), a business transfer tax (BTT), a retail sales tax, and specific excise taxes such as energy taxes. It also provides a thorough treatment of the technical aspects of implementing a consumption tax. The monograph is timely, needed, and certain to be widely and usefully read by tax policy experts and academicians.
Politicians and economists will sooner or later put the consumption tax on the nation's agenda. This brief commentary on McLure's detailed treatment of the subject makes the political and economic case for a consumption tax in our fiscal structure and responds to common criticisms of a VAT or retail sales tax.
It may be peculiar or at least lonely to argue with conviction for a consumption tax to replace part of the individual and corporate income tax or as an additional tax to reduce the deficit. McLure, however, makes the case well that "many Americans concerned about fiscal affairs seem to be increasingly convinced that a new source of federal revenue must be found." 1 Of course, as McLure notes, there is no reason why we cannot raise income tax rates, but doing so, he rightly says, would undermine one of the primary reasons for the current round of tax reform. 2 The monumental Tax Reform Act of 1986 trades off lower individual and corporate income tax rates for some of____________________