US VAT solves inequality.
Ajay K. Mehrotra 2022, Executive Director & Research Professor, American Bar Foundation; Professor of Law, Northwestern University Pritzker School of Law; Affiliated Professor of History, Northwestern University., “The Missing U.S. VAT: Economic Inequality, American Fiscal Exceptionalism, and the Historical U.S. Resistance to National Consumption Taxes”, pg 151
Since the 1970s, economic inequality has soared dramatically across the globe and particularly in the United States. In that time, one of the obstacles of using fiscal policy to address inequality has been the growing myth of the “overtaxed American”—the misguided notion that U.S. taxpayers pay more in taxes than residents of other advanced, industrialized countries. This myth has persisted, in part, because of the peculiar and distinctive nature of the fractured American fiscal and social welfare state. Even a cursory review of comparative tax data shows that the United States, by most measures, is a low-tax country compared to other affluent nations. One reason for this shortfall is the missing U.S. value-added tax (VAT).
Unlike the United States, other developed countries fund robust social spending through a balanced mix of levies, including by relying on broadbased national consumption taxes such as a VAT, which produces a tremendous amount of government revenue. By contrast, the United States has historically rejected comprehensive national consumption taxes, suggesting something distinctive about American fiscal policy. This American fiscal exceptionalism leads to a series of important research questions that may help us understand the relationship among fiscal policy, social welfare spending, and economic inequality: Why is the United States such an outlier in global comparisons of national taxes? Why have Americans historically resisted broad-based national consumption taxes of any kind? Simply put, why is there no U.S. VAT?