“A modest VAT will not by itself solve the nation’s long-term deficit problem. That will require, first and foremost, controlling the escalating costs of the American healthcare sector, which make U.S. goods and services far more expensive than in other countries. Introduction of a federal VAT would also need to be coordinated with reductions in sales taxes by states that might share the new revenue, and increases in overall taxation should wait until the American economy is out of intensive care.
That said, however, a modest VAT on the order of 5% that reduces both corporate income and payroll taxes and includes thoughtful exemptions would, perhaps more than any other single systemic initiative, spur investments, help America grow its way back to good economic health and materially reduce the deficit. It warrants the active and energetic support of the Obama administration and Congress.”