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Distributional Effects of Adopting a National Retail Sales Tax

  • Daniel R. Feenberg
  • Andrew W. Mitrusi
  • James M. Poterba

This paper describes a new household-level data file based on merged information from the IRS Individual Tax File, the Current Population Survey, the National Medical Expenditure Survey, and the Consumer Expenditure Survey. This new file includes descriptive data on household income as well as consumption. The data file can be linked to the NBER TAXSIM program and used to evaluate the distributional effects of changing the federal income tax code, as well as the distributional effects of replacing the individual income tax with a consumption tax. We use this data file to analyze the long-run distributional effects of adopting a national retail sales tax that raises enough revenue to replace the current federal individual income tax and corporation income tax, as well as federal estate and gift taxes. Our results highlight the sensitivity of the change in distributional burdens to provisions such as lump sum transfers, sometimes called 'demogrants,' the retail sales tax plan, and to the choice between income and consumption as a basis for categorizing households in distribution tables.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5885.

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Date of creation: Jan 1997
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Publication status: published as Distributional Effects of Adopting a National Retail Sales Tax , Daniel R. Feenberg, Andrew W. Mitrusi, James M. Poterba. in Tax Policy and the Economy, Volume 11 , Poterba. 1997
Handle: RePEc:nbr:nberwo:5885
Note: PE
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  1. Benjamin Okner, 1974. "Data Matching and Merging: An Overview," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 2, pages 347-352 National Bureau of Economic Research, Inc.
  2. Joel Slemrod, 1992. "Taxation and Inequality: A Time-Exposure Perspective," NBER Working Papers 3999, National Bureau of Economic Research, Inc.
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  5. Kotlikoff, L.J., 1992. "The Economic Impact of Replacing Federal Income Taxes with a Sale Tax," Papers 14, Boston University - Department of Economics.
  6. William M. Gentry & R. Glenn Hubbard, 1997. "Distributional Implications of Introducing a Broad-Based Consumption Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 11, pages 1-48 National Bureau of Economic Research, Inc.
  7. Poterba, James M & Rotemberg, Julio J & Summers, Lawrence H, 1986. "A Tax-Based Test for Nominal Rigidities," American Economic Review, American Economic Association, vol. 76(4), pages 659-75, September.
  8. Mankiw, N Gregory & Summers, Lawrence H, 1986. "Money Demand and the Effects of Fiscal Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 415-29, November.
  9. David Bradford, . "Consumption Taxes: Some Fundamental Transition Issues," EPRU Working Paper Series 95-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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  12. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
  13. Poterba, J.M., 1989. "Lifetime Incidence And The Distributional Burden Of Excise Taxes," Working papers 510, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Martin Feldstein, 1987. "Imputing Corporate Tax Liabilities to Individual Taxpayers," NBER Working Papers 2349, National Bureau of Economic Research, Inc.
  15. Gilbert E. Metcalf, 2006. "Value-Added Tax," Discussion Papers Series, Department of Economics, Tufts University 0608, Department of Economics, Tufts University.
  16. Robert E. Hall, 1996. "The Effects of Tax Reform on Prices and Asset Values," NBER Chapters, in: Tax Policy and the Economy, Volume 10, pages 71-88 National Bureau of Economic Research, Inc.
  17. Gilbert E. Metcalf, 1994. "Life Cycle versus Annual Perspectives on the Incidence of a Value Added Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 8, pages 45-64 National Bureau of Economic Research, Inc.
  18. Feldstein, Martin, 1988. "Imputing Corporate Tax Liabilities to Individual Taxpayers," National Tax Journal, National Tax Association, vol. 41(1), pages 37-59, March.
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