[PDF] Replacing The Us Income Tax With A Progressive Consumption Tax eBook

Author : Don Fullerton
Publisher :
Page : 50 pages
File Size : 11,13 MB
Release : 1982
Category : Income tax
ISBN :

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This paper examines the welfare consequences of changing the current U.S. income tax system to a progressive consumption tax. We compute a sequence of single period equilibria in which savings decisions depend on the expected future return to capital. In the presence of existing income taxes, the U.S. economy is assumed to lie on a balanced growth path. With the change to a consumption tax, individuals save more and initially consume less. As the capital stock grows, consumption eventually overtakes that of the original path, and the economy approaches the new balanced growth path with higher consumption and a greater capital stock. Both the transition and the balanced growth paths enter our welfare evaluations. We find that the discounted present value of the stream of net gains is approximately $650 billion in 1973 dollars, just over one percent of the discounted present value of national income. Larger gains occur if further reform of capital income taxation accompanies the change. We examine the sensitivity of the results, both to the design of the consumption tax and to the values of elasticity and other parameters. The paper also contains estimates of the time required to adjust from one growth path to the other.

Author : Robert Carroll
Publisher : Rowman & Littlefield
Page : 224 pages
File Size : 47,39 MB
Release : 2012
Category : Business & Economics
ISBN : 0844743941

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The authors observe that consumption taxation is superior to income taxation because it does not penalize saving and investment and propose that the U.S. income tax system be completely replaced by a progressive consumption tax. They argue that the X tax, developed by the late David Bradford, offers the best form of progressive consumption taxation for the United States and outline concrete proposals for the X tax's treatment of numerous specific economic issues.

Author : Daniel Shaviro
Publisher :
Page : 0 pages
File Size : 32,66 MB
Release : 2004
Category :
ISBN :

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Shifting from an income tax to a consumption tax would offer major simplification advantages. Even if Congress created as many preferences and other special rules as under the existing income tax, the massive set of complications that relate to realization and to the taxation of financial transactions would largely be eliminated. The main (though not the only possible) reason for opposing such a shift is the concern that it would require reducing progressivity. This article argues, however, that the capacity of a consumption tax to achieve progressivity comparable to that of an income tax is widely underestimated. In addition, this report discusses the choice between use of the origin basis and the destination basis in taxing cross-border transactions. A consumption tax can use either method, but an income tax is practically compelled to use the origin basis. Use of the destination basis would eliminate transfer pricing issues, although in their place it would create various problems that an origin-basis tax avoids, such as the need for border adjustments (e.g., tax rebates for exports). Contrary to popular perceptions, however, use of the destination basis would not constitute an export subsidy, and thus ought not to be banned under the General Agreement on Tariffs and Trade.

Author : Daniel S. Goldberg
Publisher : Oxford University Press
Page : 335 pages
File Size : 30,83 MB
Release : 2013-04-23
Category : Law
ISBN : 019994881X

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The Death of the Income Tax explains how the current income tax is needlessly complex, contains perverse incentives against saving and investment, fails to use modern technology to ease compliance and collection burdens, and is subject to micromanaging and mismanaging by Congress. Daniel Goldberg proposes that the solution to the problems of the current income tax is completely replacing it with a progressive consumption tax collected electronically at the point of sale.

Author : United States. President's Advisory Panel on Federal Tax Reform
Publisher :
Page : 304 pages
File Size : 48,31 MB
Release : 2006
Category : Income tax
ISBN :

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The official account of the advisory panel formed by Presi-dent George W. Bush to identify major problems in the U.S.Federal Tax Code and to recommend options to make the codesimpler, fairer and more conducive to economic growth. Thepanel's report was submitted to U.S. Secretary of the Trea-sury John W. Snow on Nov. 1, 2005. Chaired by Connie MackIII, the panel recommended 2 reform options: the SimplifiedIncome Tax Plan & the Growth & Investment Tax Plan.

Author : Robert Frank
Publisher : Univ of California Press
Page : 177 pages
File Size : 41,8 MB
Release : 2013-09-14
Category : Political Science
ISBN : 0520957431

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With a timely new foreword by Robert Frank, this groundbreaking book explores the very meaning of happiness and prosperity in America today. Although middle-income families don't earn much more than they did several decades ago, they are buying bigger cars, houses, and appliances. To pay for them, they spend more than they earn and carry record levels of debt. Robert Frank explains how increased concentrations of income and wealth at the top of the economic pyramid have set off "expenditure cascades" that raise the cost of achieving many basic goals for the middle class. Writing in lively prose for a general audience, Frank employs up-to-date economic data and examples drawn from everyday life to shed light on reigning models of consumer behavior. He also suggests reforms that could mitigate the costs of inequality. Falling Behind compels us to rethink how and why we live our economic lives the way we do.

Author : Mitchell L. Engler
Publisher :
Page : 0 pages
File Size : 16,33 MB
Release : 2003
Category :
ISBN :

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Dissatisfaction with the existing income tax has increased in recent years. Practical problems with the income tax base create numerous loopholes, increasingly exploited by well-advised taxpayers. For the most part, these gaps are attributable to the income tax's "realization" requirement, under which taxpayers report gains and losses as "realized" through market transactions. A consumption tax appeals as a response to these significant current loopholes since "realization" loses its significance under a consumption-based tax. The consumption tax's appeal has been further enhanced by the recent and growing recognition of the narrow difference between income and consumption taxes, assuming away practical problems. Contrary to the long-standing belief that the income tax imposes an excess tax burden on all investment return, recent scholarship establishes that, relative to a pure income tax, the consumption tax relinquishes the tax burden on only the risk-free investment return. Accordingly, the consumption tax addresses the loopholes while relinquishing relatively little. Despite such threshold appeal, a consumption tax has not yet replaced the income tax. This Article descriptively explains this failure through an analysis of the leading progressive consumption tax proposal: the cash flow tax. The Article recaps the serious offsetting concerns raised by commentary on the cash flow tax, exhibiting how such concerns relate primarily to the cash flow tax's wholesale removal of current tax on saved wages. Specifically, the lack of any current tax on saved wages raises tax avoidance, transition, and revenue concerns. In addition, saving decisions could be impacted in undesirable ways under a cash flow tax with progressive rates. Accordingly, the case for the consumption tax has been weakened by these concerns. The normative portion of this Article then presents a new progressive consumption tax proposal: a hybrid approach. Like the current income tax, the hybrid approach generally would tax wages, even if saved for future consumption. In addition, the hybrid approach would utilize a modified cash flow approach to tax the excess of (i) savings withdrawals for consumption, over (ii) previously saved wages, increased by the risk-free return thereon. As a result, the hybrid approach would capture the benefits of consumption taxation without the disabling problems of the cash flow tax. As discussed in the Article, the hybrid approach achieves this result since (i) the wage tax component addresses the cash flow tax concerns, and (ii) the modified cash flow component addresses the income tax problems.