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Overcoming The Fiscal Trilemma With Two Progressive Consumption Tax Supplements

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  • LAURENCE SEIDMAN

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    (Department of Economics,University of Delaware)

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    Abstract

    This article recommends a tax reform strategy that can accomplish three objectives: (1) raise sufficient revenue to deal with long run budget challenges; (2) promote long run economic growth; (3) provide progressivity in the face of increasing inequality. The strategy for overcoming this fiscal trilemma is to retain (with modification) the personal income tax, the corporate income tax, and the payroll tax, and add two progressive consumption tax supplements: a value added tax made progressive by a refundable VAT credit on the 1040, and a progressive consumption surtax on the 1040.

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    File URL: http://www.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2014/UDWP2014-04.pdf
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    Bibliographic Info

    Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 14-04.

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    Length: 40 pages
    Date of creation: 2014
    Date of revision:
    Handle: RePEc:dlw:wpaper:14-04.

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    Postal: Purnell Hall, Newark, Delaware 19716
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    Fax: (302) 831-6968
    Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
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    Keywords: Tax reform; Progressive consumption tax supplements;

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    1. James Alm & Asmaa El-Ganainy, 2013. "Value-added taxation and consumption," International Tax and Public Finance, Springer, vol. 20(1), pages 105-128, February.
    2. Seidman, Laurence S. & Lewis, Kenneth A., 1999. "The Consumption Tax and the Saving Elasticity," National Tax Journal, National Tax Association, vol. 52(n. 1), pages 67-78, March.
    3. Saul D. Hoffman & Laurence S. Seidman, 2003. "Helping Working Families: The Earned Income Tax Credit," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number hwf.
    4. Alan D. Viard & Robert Carroll, 2012. "Progressive Consumption Taxation," Books, American Enterprise Institute, number 33699, July.
    5. Charles E. McLure, Jr. & George R. Zodrow, 2007. "Consumption-based Direct Taxes: A Guided Tour of the Amusement Park," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(2), pages 285-307, June.
    6. Seidman Laurence, 2010. "Reducing Future Deficits While Stimulating Today's Economy," The Economists' Voice, De Gruyter, vol. 7(3), pages 1-5, August.
    7. Saul D. Hoffman & Laurence S. Seidman, 1990. "The Earned Income Tax Credit," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number eitc.
    8. James R. Hines Jr., 2006. "Taxing Consumption and Other Sins," NBER Working Papers 12730, National Bureau of Economic Research, Inc.
    9. Kenneth Lewis & Laurence Seidman, 1998. "The Impact of Converting to a Consumption Tax When Saving Propensities Vary: An Empirical Analysis," International Tax and Public Finance, Springer, vol. 5(4), pages 499-503, October.
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