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Journal Article

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

James R. Nunns, Eric Toder
September 8, 2017
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Abstract

A longstanding concern of state and local governments is that a federal value-added tax (VAT) could severely limit their reliance on sales taxes as a major source of revenue. This concern is too narrowly focused; a federal VAT could affect revenues from other sources and spending more than sales tax receipts. These broader budgetary effects have received little attention, even though they are a direct consequence of how a VAT would affect incomes, relative prices, and the value of existing assets.

Please also see this report's supplement on short-run effects and appendix.

This article was originally published in the the September 2017 edition of the National Tax Journal.

Research Area

Individual Taxes Consumption taxes (individual) State and Local Issues State and local budgets State and local taxes
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Meet the Experts

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