“Nearly half of economists surveyed by CNNMoney.com think overhauling the current system would be the best tax policy going forward. Reform would mean lower tax rates but an end to many of the deductions and special treatment enjoyed by certain taxpayers.
‘Significantly lower … tax rates in exchange for reducing tax [deductions and breaks] makes the most sense in terms of increasing growth,’ said David Berson, chief economist of the PMI Group.
Nearly a quarter of the economists would pick an even more radical change to the tax system — imposing a so-called value added tax, or VAT, a form of national sales tax common in many other advanced economies.
The tax debate that has dominated in Congress for the last few months — whether to extend the Bush-era tax cuts, or let rates rise to pre-2000 levels on some or all taxpayers — had relatively little support among the economists, with only a handful picking those choices as the most effective long-term tax strategy.
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.’
The idea of reforming the tax code has been gaining greater support in Washington, with both President Obama and Federal Reserve Chairman Ben Bernanke voicing support for tax reform, and several blue ribbon groups looking at the issue of deficit reduction say tax reform should be part of the solution.”