Problems of Transition to a Value-Added Tax

Abstract

The United States has not had much recent experience with implementing a new tax system which required a significant degree of transition planning. The last major tax system to be introduced in the U.S. was the payroll tax enacted more than 50 years ago to fund the Social Security system. Imposing such a tax on limited amounts of wages and salaries beginning on a fixed date did not present substantial transition issues such as retroactive application of the tax or inequitable treatment of particular employers or employees.