More than 40% of chief executives surveyed nationwide favor introduction of a value-added tax to help reduce the federal deficit, according to a report released Wednesday.
But the report by the Conference Board offered mixed conclusions on whether the enormous revenue potential of a value-added tax, or VAT, outweighs its drawbacks.
A value-added tax is passed along during the stages of production from raw-materials suppliers to manufacturers to wholesalers to retailers to consumers, who bear the final burden of the tax.
At each stage, buyers pay a progressively higher tax to sellers, who recover a portion of the VAT paid during earlier purchases.
The Conference Board report estimated that a VAT could raise between $13 billion and $22 billion annually in the United States for each percentage point of tax levied.
But it said a VAT would not be cost efficient at below 10% and that countries employing the tax have rates between 15% and 25%.
In a survey of 400 chief executives asked recently to evaluate new revenue sources to reduce the deficit, 42% favored a VAT, 35% were opposed and 33% were neutral.
Among concerns cited in the report, though, were the cost and number of employees that would be needed to implement and operate the tax.