At least since the Reagan administration, participants in government at all levels and of both parties have gone along with what economists told them about how the world works. Economists think that taxes are bad and reduce the supply of whatever is taxed. The supply-side tax cutting revolution that propelled President Reagan to the White House started as a property tax revolt in Orange County. California had the best state school system in the country when Proposition 13 passed in 1978. It now has one of the worst.
. . .
At the state level, however, it is true that taxes and heavy borrowing fund government programs. As California's Proposition 13 and the recent brushes with bankruptcy of several cities, including Detroit, demonstrated, the federal government does not come to the aid of insolvent state and municipal government.
"The states will not get the joke," said H. David Rosenbloom of Caplin & Drysdale at the recent 17th annual NYU/KPMG Tax Symposium on tax reform, referring to the import tax currently being discussed. Participants at that conference voted to support a VAT. The House Republican blueprint would install a destination-based cash flow tax (DBCFT) that would not be a VAT, but would require VAT mechanisms to enforce.
For the full article, please visit Tax Notes’ website (subscription required).
Excerpt taken from the article “States Consciously Uncoupling From the Cash Flow Tax?” by Lee A. Sheppard for Tax Notes.