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Lifecycle vs. Annual Perspectives on the Incidence of A Value Added Tax

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  • Gilbert E. Metcalf

Abstract

This paper analyzes the steady state distribution of tax burdens of a Value Added Tax (VAT) in the United States using a lifetime perspective. In contrast to an annual snapshot perspective, I find that a VAT on total expenditures would be proportional over the lifetime. Various modifications to the VAT (zero rating necessities or giving lump sum household rebates) would increase the progressivity of the tax substantially. However, the additional progressivity comes at the cost of substantial tax revenue.

Suggested Citation

  • Gilbert E. Metcalf, 1994. "Lifecycle vs. Annual Perspectives on the Incidence of A Value Added Tax," NBER Working Papers 4619, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4619
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    File URL: http://www.nber.org/papers/w4619.pdf
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    References listed on IDEAS

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    1. B. Douglas Bernheim, 1987. "Ricardian Equivalence: An Evaluation of Theory and Evidence," NBER Chapters,in: NBER Macroeconomics Annual 1987, Volume 2, pages 263-316 National Bureau of Economic Research, Inc.
    2. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
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    Cited by:

    1. Glenn P. Jenkins & Hatice Jenkins & Chun-Yan Kuo, 2006. "Is the Value Added Tax Naturally Progressive?," Working Papers 1059, Queen's University, Department of Economics.
    2. Thomas, Alastair, 2015. "The Distributional Effects of Consumption Taxes in New Zealand," Working Paper Series 4668, Victoria University of Wellington, Chair in Public Finance.
    3. William G. Gale & Samuel Brown, 2013. "Tax Reform for Growth, Equity, and Revenue," Public Finance Review, , vol. 41(6), pages 721-754, November.
    4. Barbora Slintáková & Stanislav Klazar, 2010. "Impact of Harmonisation on Distribution of VAT in the Czech Republic," Prague Economic Papers, University of Economics, Prague, vol. 2010(2), pages 133-149.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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