Generalized Cash Flow Taxation
We show the unique form that must be taken by a tax system based entirely on realization accounting to implement a uniform capital income tax, or, equivalently, a uniform wealth tax. This system combines elements of an accrual based capital income tax and a traditional cash flow tax, having many of the attributes of the latter while still imposing a tax burden on marginal capital income. Like the traditional cash flow tax, this system may be integrated with a tax on labor income. We also show how such a tax can be supplemented with an optional accounting for a segregated subset of actively traded securities, subjected separately to mark-to-market taxation at the uniform capital income tax rate, to permit a fully graduated tax system applicable to labor income.
|Date of creation:||Feb 2001|
|Date of revision:|
|Publication status:||published as Auerbach, Alan J. and David F. Bradford. "Generalized Cash-Flow Taxation," Journal of Public Economics, 2004, v88(5,Apr), 957-980.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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