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The broad outlines of the future of the Federal budget tell a simple story: policymakers must reign in the growth of large mandatory spending programs, accommodate a rising tax burden, or both. The latter two possibilities are especially troubling. Given the widespread dissatisfaction with the current U.S. tax system, it is difficult to imagine that voters would accept a more aggressive dose of its medicine, and research suggests that this strategy would have detrimental consequences for overall economic growth.
These realities are the foundation of the most recent push for fundamental tax reform. The United States should undertake fundamental reform, and this reform should take the form of a progressive, comprehensive consumption tax. Appropriately structured, a consumption tax will be fair, efficient, and administratively effective.
