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Research report

Effects of a Federal Value-Added Tax on State and Local Budgets

James R. Nunns, Eric Toder
April 21, 2016
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Abstract

A longstanding concern of state and local governments is that a federal value-added tax (VAT) could shrink sales tax bases. But a federal VAT could have even bigger effects on other revenues and spending through changes in incomes, relative prices, and asset values. To illustrate the range of budgetary effects of a VAT, we examine both a broad and narrow based VAT, with no change and an increase in the price level, and both short- and long-run time horizons. We find that, in some circumstances, a federal VAT could even improve the fiscal position of states and localities.

Research Area

Business Taxes Consumption taxes (business) Federal Budget and Economy Economic effects of tax policy Revenue sources Individual Taxes Consumption taxes (individual) State and Local Issues State and local budgets
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Meet the Experts

  • James R. Nunns
    Urban Institute Associate
  • Eric Toder
    Institute Fellow and Codirector, Tax Policy Center
Research report

New Evidence on The Effect of The TCJA On the Housing Market

Robert McClelland, Livia Mucciolo, Safia Sayed
March 30, 2022
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