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A Distributional Analysis of the FairTax Plan: Annual and Lifetime Income Considerations

Author

Listed:
  • Yingxu Kuang

    () (School of Business Administration, University of Houston—Victoria, Victoria, TX 77901, USA kuangy@uhv.edu)

  • Ted Englebrecht

    () (†Smolinski Endowed Chair, Professor of Accounting, College of Business, Louisiana Tech University, Ruston, LA 71272, USA)

  • Otis W. Gilley

    () (Century Telephone Enterprises, Inc., and Clarke M. Williams Memorial Endowed Professor, Professor of Economics, College of Business, Louisiana Tech University, Ruston, LA 71272, USA)

Abstract

Dissatisfaction with the current federal tax system is fostering serious interest in the FairTax Plan, which would replace most of the federal taxes with a national retail sales tax. The FairTax is promoted as being progressive, but there is considerable skepticism of this claim. We examine the distributional effects of the FairTax, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity suggest that the current federal tax system is progressive while the FairTax is regressive. Our results are also robust to different assumptions used for estimation.

Suggested Citation

  • Yingxu Kuang & Ted Englebrecht & Otis W. Gilley, 2011. "A Distributional Analysis of the FairTax Plan: Annual and Lifetime Income Considerations," Southern Economic Journal, Southern Economic Association, vol. 78(2), pages 358-381, October.
  • Handle: RePEc:sej:ancoec:v:78:2:y:2011:p:358-381
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    File URL: http://dx.doi.org/10.4284/0038-4038-78.2.358
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    Citations

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    Cited by:

    1. Justin van de Ven, 2016. "LINDA: A dynamic microsimulation model for analysing policy effects on the evolving population cross-section," National Institute of Economic and Social Research (NIESR) Discussion Papers 459, National Institute of Economic and Social Research.
    2. van de Ven, Justin, 2017. "SIDD: An adaptable framework for analysing the distributional implications of policy alternatives where savings and employment decisions matter," Economic Modelling, Elsevier, vol. 63(C), pages 161-174.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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