“In my ideal world, we would get rid of our income tax system with all of its complications and rely on consumption taxes for a significant share of federal revenues. The VAT is easy to administer, deducted automatically in every transaction….Policy makers can favor certain industries and taxpayers simply by adjusting the relevant rates and credits. (No more squadrons of lawyers finding loopholes!) Finally, a consumption tax encourages savings over conspicuous consumption: You can dodge taxes only by by being more careful about how you spend your money. It is also a way to tax very wealthy people without having to distinguish between their accumulated wealth and their current income. Their tax shelters would no longer save them from taxes.
Okay, time to stop dreaming. Some version of Form 1040 and April 15 will probably continue to be aspects of the American nightmare for many years to come. But let’s at least include a national consumption tax as part of an efficient, fair new system to generate the revenues we need to close the deficit, reduce our debt, and address other key national priorities. We need more money to pay our bills, and adding a new tax, after we enact tough new statutory budget controls and spending limits, may make sense as an alternative to dramatically raising our income and payroll tax rates and putting more pressure on an already creaky foundation of our tax policy,” p.118-119