CNNMoney.com surveyed 23 economists about where the economy is headed and how tax reform might be used to stimulate growth and to address America’s debt crisis. Nearly half the economists surveyed believe “overhauling the current system would be the best tax policy going forward,” including lower tax rates combined with ending certain tax preferences. “Several of the economists favor implementing both tax reform and a VAT. ‘Actually, we need a combination,’ wrote David Wyss, chief economist with Standard & Poor’s. ‘The fiscal outlook is disastrous, and unless draconian cuts in Medicare and Social Security are made, taxes will have to rise.’”
On “60 Minutes,” Federal Reserve Chairman Ben Bernanke remarked that “The tax code is very inefficient. Both the personal tax code and the corporate tax code. By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest.”
The Domenici-Rivlin plan from the Bipartisan Policy Center calls for a VAT offset in the first year by a payroll tax cut. Gov. Mitch Daniels of Indiana has suggested sweeping overhaul with a VAT paired with a flat tax on income with a high deductible. And, President Obama has indicated he would like to see the tax system reformed before the end of the two-year extension of the tax cuts.