The NYT touted the merits of a value-added tax in a piece today. The article tells readers that the United States is an outlier among wealthy nations in not having a value-added tax. This is only partially true. There are sales taxes in 49 states. These taxes are comparable to value added taxes, but they are only imposed on the final sale of an item, not on the value-added at each stage in the production process. The incidence of the taxes are similar, in that both are taxes on domestic consumption. They can be avoided to the extent that people either save or are able to spend in other countries. For these reasons, they are regressive taxes.
--Dean Baker
