Consumption Taxes: Some Fundamental Transition Issues
A number of tax reform plans under discussion in the United States would replace the existing hybrid income-based system with a consumption-based system. In this paper I use uniform (single-rate) consumption and income taxes: (a) to explain how the problem of taxing 'old savings' or 'old capital' manifests itself in the shift from an income to a consumption base; (b) to indicate the tradeoffs that must be confronted in dealing with this phenomenon; (c) to show how price level changes that may or may not accompany a transition affect the distribution of gains and losses; (d) to sketch out how a transition might affect interest rates and asset prices (including owner-occupied housing); (e) to explore the case in equity for protecting the tax- free recovery of old savings; and (f) to emphasize the incentive problems that arise if savers and investors anticipate a change in the tax rate in a consumption-based system.
|Date of creation:||Oct 1995|
|Date of revision:|
|Publication status:||published as Frontiers of Tax Reform, Michael J. Boskin, ed., pp. 123-150, (Stanford, CA: Hoover Institution Press, 1996).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roger H. Gordon, 1985. "Taxation of Corporate Capital Income: Tax Revenues Versus Tax Distortions," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 1-27.
- Alan A. Tait, 1991. "Value-Added Tax; Administrative and Policy Issues," IMF Occasional Papers 88, International Monetary Fund.
- Christian Keuschnigg, 1990.
"The Transition to a Cash Flow Income Tax,"
Discussion Paper Serie A
276, University of Bonn, Germany.
- Alan J. Auerbach & Lawrence Kotlikoff, 1980.
"National Savings, Economic Welfare, and the Structure of Taxation,"
Cowles Foundation Discussion Papers
570, Cowles Foundation for Research in Economics, Yale University.
- Alan J. Auerbach & Laurence J. Kotlikoff, 1983. "National Savings, Economic Welfare, and the Structure of Taxation," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 459-498 National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Laurence J. Kotlikoff, 1981. "National Savings, Economic Welfare, and the Structure of Taxation," NBER Working Papers 0729, National Bureau of Economic Research, Inc.
- Browning, Edgar K, 1978. "The Burden of Taxation," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 649-71, August.
- Bradford, D.F., 1989.
"Market Value Us. Financial Accounting Measures Of National Saving,"
34, Princeton, Woodrow Wilson School - Discussion Paper.
- David F. Bradford, 1989. "Market Value Vs. Financial Accounting Measures of National Saving," NBER Working Papers 2906, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter.
- Howitt, Peter & Sinn, Hans-Werner, 1989.
"Gradual Reforms of Capital Income Taxation,"
American Economic Review,
American Economic Association, vol. 79(1), pages 106-24, March.
- Alan J. Auerbach, 1986.
"Tax Reform and Adjustment Costs: The Impact on Investment and Market Value,"
NBER Working Papers
2103, National Bureau of Economic Research, Inc.
- Auerbach, Alan J, 1989. "Tax Reform and Adjustment Costs: The Impact on Investment and Market Value," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 939-62, November.
- David F. Bradford, 1991. "Market Value versus Financial Accounting Measures of National Saving," NBER Chapters, in: National Saving and Economic Performance, pages 15-48 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5290. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.