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On the Incidence of Substituting Consumption Taxes for Income Taxes

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  • A Krause

Abstract

This paper shows that tax reforms involving an increase in consumption taxes and a decrease in income taxes cannot always be designed in a way that protects the welfare of some chosen class of consumer (e.g., low-income households), even if the government is indifferent to the welfare effects on all other consumers. This is contrary to common intuition and claims by some governments.

Suggested Citation

  • A Krause, 2010. "On the Incidence of Substituting Consumption Taxes for Income Taxes," Discussion Papers 10/17, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:10/17
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    More about this item

    Keywords

    Tax incidence; consumption taxes; income taxes; tax reform.;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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