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Irving Fisher's Spendings (Consumption) Tax in Retrospect

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  • John B. Shoven
  • John Whalley

Abstract

. Irving Fisher wrote a significant number of papers towards the end of his career on the design of the U.S. tax system. These writings culminated in a book that he wrote with his brother Herbert in 1942. Fisher thought that the double taxation of saving under an income tax was extremely harmful to the economy and he therefore proposed a “spendings” tax or what he referred to as a “real income” tax. Even though he disliked the terminology, he advocated what today would be referred to as a progressive consumption tax. Fisher's analysis was both theoretical and practical. His 1942 book contained a proposed tax return that implemented his ideas. His analysis is surprisingly modern and relevant today. This paper presents the Fisher proposal and examines the current U.S. tax system in light of his tax views. We argue that Fisher would find that the U.S. tax system lacks intellectual coherence, is economically inefficient, and unnecessarily complex.

Suggested Citation

  • John B. Shoven & John Whalley, 2005. "Irving Fisher's Spendings (Consumption) Tax in Retrospect," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(1), pages 215-235, January.
    • Handle: RePEc:bla:ajecsc:v:64:y:2005:i:1:p:215-235
    DOI: 10.1111/j.1536-7150.2005.00360.x
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    References listed on IDEAS

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    1. William Vickrey, 1939. "Averaging of Income for Income-Tax Purposes," Journal of Political Economy, University of Chicago Press, vol. 47(3), pages 379-379.
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