Professor Michael Graetz Testifies on Role VAT Tax Can Play in Tax Reform
Professor Michael Graetz Testifies on Role VAT Tax Can Play in Tax Reform
New York, July 26, 2011— Michael J. Graetz, Isidor and Seville Sulzbacher Professor of Law, Columbia Alumni Professor of Tax Law, testified today before a House Ways and Means Committee hearing on Tax Reform and Consumption-Based Tax Systems.
Graetz told members that “our nation’s tax system is badly broken,” and that “astounding income tax complexities confront taxpayers at every income level.”
Noting that “doing nothing is no option,” Graetz outlined his plan for reform, which includes the introduction of a border-adjustable value added tax on sales of goods and services. This would, according to Graetz, “decrease the nation’s need to rely so heavily on the income tax to finance government’s spending.”
He detailed his proposal, a “Competitive Tax plan,” which includes four key pieces:
- Enact a value added tax – a broad based tax on sales of goods and services now used by more than 150 countries worldwide. We are the only OECD country that does not have a VAT or, as it is sometimes called, a goods and services tax;
- Use the revenues produced by that consumption tax to finance an income tax exemption of $100,000 of family income and to lower substantially the individual income tax rate on income above that amount;
- Lower the corporate income tax rate to 15%, or at most 20%; and
- Replace the earned income tax credit and provide low and middle income families with tax relief from the VAT burden through payroll tax offsets and debit cards.
More about Graetz’ ideas about tax reform are detailed in his book 100 Million Unnecessary Returns: A Simple, Fair and Competitive Tax System for the United States.
The full text of Graetz’ testimony is available here.
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