Income tax consumption tax

A consumption tax —also known as an expenditures tax, consumed- income tax ,. Or, as economists Alvin Rabushka and Robert Hall put it, taxing income taxes. At first glance, a consumption tax gives you the opportunity to control how much you pay in taxes. The less you spend – consume – the less of . Let us return, for example, to our case of the income as compared to an excise tax.

Boskin, Taxation , Saving, and the Rate of Interest, J. Economists would have said a progressive consumption tax is a. Income Base Taxes : The . To replace existing federal income taxes , a new consumption tax would have to produce a large amount of revenue. Total federal receipts were nearly $1. Progressivity is maintained through a large income tax exemption for many U. Our paper focuses on the choice between an income tax and a consumption tax.

We focus on this choice, rather than the possibility of exotic taxes suggested by . The second argument in favor of consumption taxation is that a welfare loss occurs because the income tax distorts intertemporal consumption choices. We note, however, that the difference between income and consumption taxes — the tax burden on capital income — is at the root of many of the observations on . Deloitte refers to one or more of . The standard method for imposing consumption taxes , as under the VAT, is to start on the income side, taxing all factor returns but . In the long run, we should ease the tax burden on saving and investment by moving toward some form of consumption taxation. A common claim holds that income from saving is taxed at a special maximum rate of percent, well below the 39. In the presence of existing income taxes , the U. With the change to a consumption tax , individuals save . A decrease from a labor income tax rate of in our benchmark to would require a 13.

Furthermore, we find that revenue neutral policies that increase consumption taxes and decrease income taxes , have a short but significant expansionary effect on . Consumption tax , a tax paid directly or indirectly by the consumer, such as. Changes in wealth—or savings—are not taxed by consumption taxes but are taxed by income taxes. Data and research on consumption tax including indirect tax topics such as Value Added Tax (VAT), Goods and Services Tax (GST), consumption taxes.

This book proposes that the solution to the problems of the current income tax is to abandon it and completely replace it with a progressive consumption tax. Such a conversion has been proposed as part of a complete . Despite controlling for . Businesses and individuals face the same flat rate on all income. The X- tax is simply a variant of the flat tax in which wages are taxed at graduated rates, and the . Although there are many examples of tax revenue neutrality having been achieved by combining a rise in the consumption tax rate with a reduction in income.