WASHINGTON -- Sen. Ben Cardin has been pressing for what he calls a progressive consumption tax since he first arrived in Congress. More than 26 years later, the Maryland Democrat thinks the idea may have its best shot in a long time.
Cardin, a member of the Senate Finance Committee, told reporters Thursday he is beginning to dig into the details of how such a tax might be structured and, perhaps, included in the sweeping overhaul of the federal tax code lawmakers in both parties are contemplating.
The proposal is broadly similar to the value-added tax paid in many other countries -- a tax on consumption rather than income. Cardin said he believes the rate would fall somewhere between 10 percent and 15 percent. To help low income families, the amount paid in consumption tax would be rebated for the first $25,000 spent.
Income tax would kick in for those earning more than $100,000 annually.
Cardin said the proposal would allow the government to more than halve the corporate income tax rate to around 15 percent. He cast the idea as a simplified code that would ultimately make the U.S. more competitive overseas.
"We are not competitive globally and I don't think you can reform our codes to be competitive if you rely on income tax revenues," Cardin said. "We can continue to put our head in the sand…and lose jobs and lose global competition or we can recognize how American can, through its tax code, have competitive advantages."
But Cardin acknowledges such a significant change for individuals and corporations remains a long shot, even with the bipartisan momentum over the past several years to reform a tax code that members of both parties say is flawed. In 2010, the Senate voted 85-13 against a non-binding resolution intended to gauge support for a VAT.
Conservatives have long argued the tax is little more than a way of squeezing more money into federal coffers. Cardin acknowledges his idea is intended to raise revenue "over and above what we have today."
"What he's pushing is a huge tax increase," said Curtis Dubay, a senior tax policy analyst at the Heritage Foundation. "You don't create a whole new structure to lower taxes."
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and House Ways and Means Chairman Dave Camp, a Michigan Republican, have been working for months on proposals. As part of the process, likely to continue next year, they solicited input from other senators.
Cardin said he expects to have more details of his plan in the fall.