Tax Policy:

State Tax Officials Have Concerns About a Federal Consumption Tax

GGD-90-50: Published: Mar 21, 1990. Publicly Released: Mar 21, 1990.

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Pursuant to a legislative requirement, GAO surveyed state tax policymakers to determine their concerns about the enactment of a federal consumption tax as a budget deficit reduction option.

GAO found that: (1) 72 percent of state tax policymakers preferred the use of existing federal taxes to reduce the federal deficit; (2) 45 percent of state officials favored additional corporate income taxes, while 37 percent supported individual tax increases; (3) 81 percent of state tax officials opposed to a federal sales tax and 68 percent of those opposed to a federal value-added tax were concerned that such taxes would limit states' ability to raise sales tax revenues, pressure states to match the federal tax base, and confuse taxpayers; (4) less than 20 percent of state tax officials would reduce their opposition to a federally imposed consumption tax if they were offered a share of the resulting federal revenues; (5) over half of state tax officials were concerned about the regressivity of a federal consumption tax; and (6) for a federal sales tax, 31 state tax officials expected a great impact, while 59 percent expected a federal value-added tax to have no impact at all.

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