Introduction of a U.S Consumption Tax Would Raise $3 Trillion
Generating considerable income and being relatively easy to administer, raising revenue through incremental increases in supply chain consumption tax is nothing new.
In a recent report from the U.S Congressional Budget Office (CBO), it was highlighted introducing this legislation could aid the U.S in significantly reducing their current budget deficit. They’ve advised introducing a 5% VAT rate on household consumption and goods would boost federal revenues by $3 trillion through to 2028.
With the U.S deficit increasing exponentially and supporting CBO reports forecast the budget deficit to surpass $1 trillion by 2022, this additional revenue would be a welcome boost to the US economy.
This hypothetical 5% VAT rate is still considerably lower than the average (19.2%) VAT rate for other OECD countries, but as with all taxes, there are concerns. Consumption taxes are typically thought to be regressive since lower-income families spend a larger percentage of their total income than higher-income families do each year. One proposed method of addressing this concern would be to exclude certain basic goods and services from the tax base. With other suggestions of alleviating this type of tax burden would be to offer refundable income tax credits for low-income individuals and families.