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Overcoming The Fiscal Trilemma With Two Progressive Consumption Tax Supplements

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  • LAURENCE SEIDMAN

    (Department of Economics,University of Delaware)

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.

Suggested Citation

  • Laurence Seidman, 2014. "Overcoming The Fiscal Trilemma With Two Progressive Consumption Tax Supplements," Working Papers 14-04, University of Delaware, Department of Economics.
    • Handle: RePEc:dlw:wpaper:14-04.
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    References listed on IDEAS

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    1. Congressional Budget Office, 2012. "An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 43539, Congressional Budget Office.
    2. Seidman Laurence, 2010. "Reducing Future Deficits While Stimulating Today's Economy," The Economists' Voice, De Gruyter, vol. 7(3), pages 1-5, August.
    3. Congressional Budget Office, 2012. "The Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 42905, Congressional Budget Office.
    4. Charles E. Mclure, 1987. "The Value-Added Tax: Key to Deficit Reduction?," Books, American Enterprise Institute, number 725195, September.
    5. 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, December.
    6. 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.
    7. Seidman, Laurence S. & Lewis, Kenneth A., 1999. "The Consumption Tax and the Saving Elasticity," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(1), pages 67-78, March.
    8. Congressional Budget Office, 2012. "An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 43539, Congressional Budget Office.
    9. Congressional Budget Office, 2012. "The Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 42905, Congressional Budget Office.
    10. Congressional Budget Office, 2012. "An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 43539, Congressional Budget Office.
    11. Congressional Budget Office, 2012. "The Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 42905, Congressional Budget Office.
    12. James R. Hines Jr., 2007. "Taxing Consumption and Other Sins," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 49-68, Winter.
    13. James Alm & Asmaa El-Ganainy, 2013. "Value-added taxation and consumption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 105-128, February.
    14. Congressional Budget Office, 2012. "The Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 42905, Congressional Budget Office.
    15. Congressional Budget Office, 2012. "An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 43539, Congressional Budget Office.
    16. 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.
    17. 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;International Institute of Public Finance, vol. 5(4), pages 499-503, October.
    18. Alan D. Viard & Robert Carroll, 2012. "Progressive Consumption Taxation: The X Tax Revisited," Books, American Enterprise Institute, number 10533, September.
    19. Congressional Budget Office, 2012. "The Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 42905, Congressional Budget Office.
    20. 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, December.
    21. Seidman, Laurence S. & Lewis, Kenneth A., 1998. "Conversion to a Consumption Tax in a Growth Model with Heterogeneity," Journal of Macroeconomics, Elsevier, vol. 20(4), pages 665-680, October.
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    23. Congressional Budget Office, 2012. "An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022," Reports 43539, Congressional Budget Office.
    24. Laurence S. Seidman, 1997. "A Progressive Consumption Tax," Challenge, Taylor & Francis Journals, vol. 40(6), pages 63-84, November.
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    Cited by:

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    2. Udai Lal Paliwal & Nitin Kishore Saxena & Ashutosh Pandey, 2019. "Analysing the Impact of GST on Tax Revenue in India: The Tax Buoyancy Approach," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 514-523.

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    More about this item

    Keywords

    Tax reform; Progressive consumption tax supplements;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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