Border Adjusted Value Added Tax

Ernest "Fritz" Hollings of South Carolina ran for president in 1984

Former US Senator Ernest Hollings wants the United States to replace its corporate income tax with a border adjusted value added tax.  He writes that he wants to see “the President and the Congress beginning to solve the deficit, debt, jobs, economy, and health cost problems by replacing the corporate tax with a 5% VAT- NOW!”  He may be onto something, but I think he’s also missing something.  Surely, a 5% border adjusted value added tax would send more revenue to Washington than the corporate income tax now does.  However, the reason the corporate income tax does not raise more revenue is that American corporations shelter their income by taking advantage of deductions.  End the tax, and you end those shelters.  Since employer-provided health insurance is one of those shelters, a 5% VAT would probably not “solve” the problem of access to health care in the USA.

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