Second, a VAT, like a retail sales tax, is regressive. If the budget deficit were reduced by imposing a federal VAT, the burden would fall more heavily on low- and middle-income people than it would if the same amount of revenue were raised from an income tax surcharge.
Third, since the federal government does not have a general sales tax, it would have to enact a whole new structure to collect a VAT. Collection costs could be significant.
A common shared VAT at the state level, however, would enhance, not threaten, state and local fiscal health. If a shared VAT were substitituted for current state retail sales taxes, states would benefit from the additional revenue collected on cross-border sales now escaping taxation. They would be able to extend their sales taxes to services with less concern about either double counting or migration of service providers to other states. The VAT need be no more regressive than existing state sales taxes and could be less so, since higher-income people devote more of their incomes to services. Incremental collection costs would also be lower at the state level, since most states already collect sales taxes. Hence a VAT is a strong candidate for a common tax to be shared by the states,” p. 144-145