Word: vat
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Replacing current taxes with a VAT would remove the bias towards consumption, and thus cause savings to increase. This, in turn, would result in the creation of more jobs and an increase in economic growth...
...VAT would also be fair and equal. It would be a proportional tax which would have similar effects on all income classes. Fairness would be achieved since those with similar incomes would pay similar amounts of taxes. This would be a vast improvement over the present system in which people with the exact same incomes often end up paying dramatically different amounts of taxes as a result of loopholes and differences in the composition of consumption...
Although most economists agreed that a VAT can successfully achieve horizontal equity, a traditional criticism focuses on vertical equity since the VAT is allegedly regressive. There are two problems with this criticism...
First, opponents' claim of regressiveness is questionable, since studies have shown that the VAT is not as regressive as payroll taxes which are currently in the US to generate as much as a fifth of total revenue. Furthermore, if the VAT is regressive, the government can easily offset this by granting refundable tax credits (such as the Earned Income Tax Credit...
...short, by implementing a VAT and granting income-adjusted refundable tax credits, the government can have the best of both worlds: efficiency and equity...