The current code taxes labor reliably while allowing capital, wealth, perks, and inherited appreciation to escape or defer tax. The Accord taxes progressively by broadening the base, applying higher rates at the top, and pairing broad consumption taxation with monthly rebates and luxury surcharges.
The United States is the only OECD country without a federal value-added tax. Today federal revenue rides on income tax (volatile across business cycles) and payroll tax (capped at the FICA ceiling). A broad consumption tax stabilizes federal revenue across cycles — every peer democracy uses one — but a naked VAT is regressive because lower-income households spend a larger fraction of income on consumption.
The architecture's task is to capture the consumption-tax stability without the regressivity. The Pre-bate is the answer: a universal monthly cash delivery sized to fully offset VAT incidence at the bottom of the distribution, restoring progressive net incidence at every income decile.
Broad-base VAT at 10% on ordinary consumption (corridor 8%–12% via the Debt Sunset governor). A higher luxury tier of 15% applies to the portion of a purchase above category-specific thresholds (the value of a motor-vehicle sale above $100,000; the value of a wristwatch above $2,000; the value of a yacht above $100,000 — categories and thresholds set by Expert Board on a published methodology).
Universally paired with the Pre-bate: $3,480/adult/year ($290/month) delivered via FedCard on the 1st of every month — no application, no means test, no enrollment. The Pre-bate exceeds VAT incidence at the bottom of the distribution; a household consuming below a published envelope receives a net transfer.
No exemptions. No food carve-out, no medicine carve-out, no children's-clothing carve-out. Exemption-laden VAT systems produce lower revenue, higher administrative complexity, and regressive outcomes when wealthy households consume in exempt categories (organic produce, boutique pharmacies, designer children's clothing). The universal Pre-bate is the superior redistribution mechanism — it delivers cash to every adult regardless of what they consume.
Everyone consuming taxable goods and services. The luxury tier bites high-end purchases above category thresholds. Imported goods pay VAT at customs (destination-principle); exports are zero-rated (the broad pattern in every functioning VAT system).
For a typical household, monthly VAT paid on consumption is offset or exceeded by the monthly Pre-bate received. The household experiences VAT primarily as a price-level shift on consumption, with cash flow restored by the rebate.
Lower-income households via the Pre-bate. A household consuming below the published envelope receives a net transfer (Pre-bate exceeds VAT paid). The Federal Reserve's SCF + BEA PCE distributions imply this covers the bottom 30–40% of households at the planned 10% rate.
Middle-income households break roughly even. High-consumption households pay net VAT, with the luxury tier increasing the burden at the top of the consumption distribution.
The Pre-bate is per-adult, not per-household — meaning two-adult households receive 2× the per-adult amount, automatically scaling protection with household size.
$1.46T at maturity (per landing-page summary).
VAT is the most fiscally stable instrument in Engine 1: broad base, low rate, low avoidance, source-collected at point of sale at every stage of value-added. Gross revenue at the 10% rate runs approximately $1.6–1.8T per year (per DNA Chapter 8). The Pre-bate consumes ~$500B (CFG.vat.preBateEnvelopeB), leaving net revenue of ~$600–800B. The luxury tier adds modestly.
Across the business cycle, VAT smooths total federal revenue: payroll tax is volatile with employment; income tax is volatile with capital-gains realizations and corporate profits; VAT correlates with consumption, which is the smoothest of the three. Together payroll tax + income tax + VAT form the architecture's three structural-revenue stabilizers.
See tax ladder · fiscal scoring
- Underground-economy avoidance
- Source collection at every stage with credit-and-invoice mechanics creates a paper trail. Digital payment rails (FedCard) make cash-only transactions a smaller share of the economy than in pre-FedCard architectures.
- Cross-border arbitrage
- Destination-principle invoicing and import VAT collection at customs prevent the cross-border-shopping shelter that some sales-tax states experience.
- Luxury-threshold fragmentation
- Categories and thresholds aggregate per published rule — a $180,000 car cannot be split into invoices to escape the luxury tier on the portion above $100,000.
- Exemption arbitrage
- No exemptions to game. The Pre-bate is the redistribution mechanism, not category exclusions.
VAT is among the hardest taxes to avoid because it collects at every stage of value-added with credit-and-invoice mechanics that create paper trails.
- FedCard
- Pre-bate delivery rail. Universal account; monthly disbursement on the 1st; no means test, no application, no enrollment.
- Debt Sunset Governor
- VAT rate adjusts within the 8%–12% corridor coupled with the broader Debt Sunset framework.
- Carbon fee + dividend
- Parallel rebate architecture: per-adult per-month delivery via FedCard. The two universal rebates compound architecturally — a low-consuming, low-emitting household receives a net transfer from both.
- payroll tax
- payroll tax and VAT together stabilize federal revenue across the business cycle. payroll tax collects on payroll (volatile with employment); VAT collects on consumption (less volatile).
- State sales tax
- States already collect sales tax. Federal–state coordination via VAT-harmonization grants in the rollout (see /rollout). Total federal+state consumption-tax burden remains lower than peer democracies even with the luxury tier.
The Pre-bate is delivered via FedCard, the same rail used for the carbon-fee household rebate, the Universal Child Allowance, and SS 2.0 benefits. Building on a single universal-account rail makes monthly disbursement free and reliable.
VAT is regressive — lower-income households spend a larger fraction of income on consumption, so a flat-rate consumption tax falls more heavily on them. The Pre-bate is a redistribution program politically vulnerable to future cuts; without it, the VAT is regressive at the bottom. And state sales taxes already exist; a federal VAT compounds the burden.
The Pre-bate envelope is sized so that NET VAT incidence is progressive at every income decile (canonical workbook). The combined effect — VAT paid + Pre-bate received — shifts purchasing power TO the bottom 40% of the distribution, not from it.
The Pre-bate is structurally stable because it is universal. Means-tested benefits are politically vulnerable to cuts; universal benefits with broad recipient bases are not. Every adult receives the Pre-bate; every adult is therefore a stakeholder.
State sales taxes are a real coordination problem. The rollout includes federal–state harmonization grants (/rollout). The combined federal+state consumption-tax burden under the Accord remains lower than peer democracies that have made consumption-tax architecture work for decades — Germany at 19%, UK at 20%, France at 20%, Sweden at 25%.