Erskine Bowles, co-chair of President Obama’s fiscal commission, said Wednesday that while he wants most of the government’s budget deficits to be closed by cutting spending, he also thinks a value-added tax is called for.
“I’d like us to do something … where it’s 75 percent out of spending and 25 percent out of revenue,” Bowles said. “I just want to see the vast majority come out of spending. I think that’s the right thing to do.”
“On the revenue side, as we look at new forms of revenue, I’d like to see us broaden the tax base and reform the tax code and simplify the code, and make America more competitive in this knowledge-based global economy,” Bowles added, speaking at the U.S. Chamber of Commerce.
“I think it makes sense to lower taxes on work, lower taxes on investment and lower the corporate tax to make America the best place to start and grow business. And then I’d like to see some of that replaced with a consumption tax,” he said.
Bowles has indicated in the past that he would favor replacing the income tax with a VAT, which is a tax on goods at every stage of production, which is ultimately passed on to the consumer.
Many conservatives, however, worry that a VAT would be added on top of the income tax rather than replacing it.
In April, the Senate voted overwhelmingly in favor of a resolution stating that a VAT is a “massive tax increase that will cripple families on fixed income.”
The corporate income tax is currently the second highest in the world, which many say is a high barrier to business investment and development for both U.S. and foreign companies.