Telegraph | Money | Greenspan proposes scrapping income taxScrapping income tax and replacing it with a "consumption tax" on spending would be the best way to boost the US economy, Alan Greenspan said yesterday.
The Federal Reserve chairman said that the current tax code, which was revamped in 1986, had once again become too unwieldy and should be reformed.
"A simpler tax code would reduce the considerable resources devoted to complying with current tax laws and the freed-up resources could be used more productively," he said.
A consumption tax could take the form of a value-added tax, similar to that in the UK and Europe, or a national retail sales tax.
Mr Greenspan, who was talking to President Bush's tax reform advisers, said he thought it would promote saving and encourage capital formation.
However, he said a hybrid approach would avoid difficult transition issues.