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January 1980

The Value-Added Tax—A Review of the Issues

by R. W. Hafer and Michael E. Trebing

Recently many groups have called for major tax reform. These groups maintain the that the existing U.S. tax system has altered economic incentives and negatively influenced the performance of the economy. One possible solution to this problem is for the United States to adopt a value-added tax (VAT) similar to that used by European governments. This article provides a general economic framework for examining the current debate over the introduction of the VAT into the U.S. tax system.