Over at the American Enterprise institute’s Tax Notes, economists Robert Carroll and Alan Viard have a good piece arguing in favor of fundamental tax reform rather than a VAT. They advocate the adoption of a consumption tax as a complete replacement of the income tax. Their ideal is the Bradford X tax – named after the late economist David Bradford — which is a modified from of a VAT.
The X tax can be much more progressive than a conventional VAT, which may make it more politically appealing as a complete replacement for the progressive income tax. Depending on the availability of alternatives such as the X tax and the safeguards that might be adopted against spending growth, a VAT may or may not be right for the United States.
It’s an article worth reading. They explain the benefits of a replacement VAT, such as efficiency and simplicity, but they also spend some time talking about all the issues that would need to be addressed before even being able to adopt a VAT, federalism being a big one:
A partial-replacement or complete-replacement VAT could have a substantial effect on the ability of state and local governments to administer their existing income taxes. Difficulties would arise not from the new VAT, but from any associated changes to the federal income tax.
The whole article is here.