Greenspan suggests Consumption Tax
March 3, 2005
Federal Reserve chairman Alan Greenspan has suggested that a consumption tax, similar to the European VAT, should form a part of US tax reforms.
Speaking before a presidential tax advisory panel, he suggested that to reach a consumption tax only system would require a hybrid to be developed by initial reforms, combining income tax and consumption tax together.
The change is being viewed as just one measure that might help add longer-term financial stability to the US economy, particularly for encouraging saving and capital formation.
The idea of a consumption tax has already been suggested before, and critics have argued that it would mean that the poorer would get poorer.
Those in favour have suggested that a consumption-only tax could only result in the richer footing more of the bill.
However, Greenspan warned that any tax reforms had to try and keep the system as simple and accessible as possible.