Washington Retail Insight

Deficit Commission Co-Chairman Backs Consumption Tax

By J. Craig Shearman
Washington Retail Insight
July 15, 2010

The co-chairman of President Obama’s deficit reduction commission says he supports creation of a nationwide consumption tax as a new source of revenue to help reduce the nation’s debt.

Erskine Bowles, speaking at a U.S. Chamber of Commerce meeting in Washington on Wednesday, said the National Commission on Fiscal Responsibility and Reform should come up with a plan that lowers corporate and individual tax rates as well as taxes on investment in order to “make America the best place to start and grow a business.” Bowles said 75 percent of needed deficit reduction should come from spending cuts and 25 percent from tax increases.

To make up for the reduced revenue, “I’d like to see some of that replaced with a consumption tax,” Bowles said. “I think that would help our exports. I think it would help eliminate the tax gap, which is about $350 billion a year. And I think it would make a lot of sense.”

Bowles did not offer specifics, but his remarks came as a number of Washington policymakers have suggested that the commission should support a Value Added Tax.

NRF has long opposed any form of consumption tax, including a VAT, because of the negative impact on consumer spending. NRF has commissioned a study on the impact of a VAT this will be submitted to the commission later this year.

The commission has a December deadline to develop a plan to stabilize the federal budget deficit by 2015 and reduce the federal debt over the long term. Congressional leaders have pledged to give the panel’s recommendations and up-or-down vote, but only if 14 of the 18 members agree on a proposal.

© 2010 National Retail Federation