By: Alan D. Viard, Robert Carroll

Hardcover

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Alone among developed countries, the United States has no broad-based national consumption tax. Yet, economic analysis suggests that consumption taxation is superior to income taxation because it does not penalize saving and investment. The authors conclude that the U.S. income tax system should be completely replaced by a progressive consumption tax. The authors argue that the X tax, developed by the late David Bradford, offers the best form of progressive consumption taxation for the United States. To achieve progressively, the X tax modifies the value added tax by splitting its consumption tax base into two components, wages and business cash flow. The X tax applies graduated tax rates to households' wages and applies a flat tax rate, equal to the highest wage tax rate, to business firms' cash flows. The authors outline concrete proposals for the X tax's treatment of pensions and fringe benefits, business firms, financial intermediaries, international transactions, owner-occupied housing, state and local governments, the transition, and other issues. By adopting the X tax, the United States can preserve tax progressively while promoting economic growth through the removal of tax penalties on saving and investment.

Progressive Consumption Taxation carefully lays out the rationale for adopting a progressive consumption tax system in the United States and shows how such a system can be adopted. Carroll and Viard provide the motivating 'big picture' arguments but also tackle the many thorny details that confront this tax reform, including the appropriate treatment of financial intermediaries, international transactions, and transition from the income tax. The book is accessible to those with a policy interest, but it will also enlighten tax experts. -- Alan J. Auerbach, University of California, Berkeley Although consumption-type taxes like the Flat Tax and FairTax are beloved by GOP presidential candidates, they have never won political traction because they are widely perceived as unfair. Bob Carroll and Alan Viard take fairness considerations seriously and explain how a modern version of the X Tax could address them while preserving the efficiency advantages of a consumption tax. The book provides a comprehensive and accessible analysis of progressive consumption taxation and should be on the reading list of anyone interested in fundamental tax reform. -- Leonard E. Burman, Syracuse University and the Urban Institute

LIST OF ILLUSTRATIONS ACKNOWLEDGMENTS INTRODUCTION 1. WHY TAX CONSUMPTION? Removing the Income Tax Penalty on Saving Gains from Reform Consumption-Tax Features in the Current Income Tax System Conclusion Box: The Trade-off Fallacy 2. THE CASE FOR THE X TAX The Retail Sales Tax and the Value-Added Tax The Two-Part VAT The X Tax: A Progressive Two-Part VAT Comparing the X Tax to the Personal Expenditures Tax Conclusion Box: Optics of the X Tax and the PET 3. MAINTAINING PROGRESSIVITY Tax Rate Schedule Assessing the Distributional Effects of the X Tax Conclusion Box: Zero Revenue from Taxation of Risky Returns 4. FRINGE BENEFITS AND TRANSFER PAYMENTS Fringe Benefits Financing Social Security and Medicare Public and Private Transfer Payments Conclusion Box: Taxation of Gambling 5. BUSINESS FIRMS General Issues Distinguishing Wages from Business Cash Flow Firms with Negative Business Cash Flows Conclusion 6. FINANCIAL SERVICES Neutral Tax Treatment The Problem of Mislabeled Transactions The Search for a Solution The R+F Cash-Flow Method Accounting Methods Special Cases Conclusion 7. INTERNATIONAL TRANSACTIONS The Border Adjustment Question The "Competitiveness" Illusion Giving Wealth Away without Really Trying Above-Normal Returns and Transfer Pricing Other Cross-Border Issues Conclusion Box: Border Adjustment with Fixed Exchange Rates 8. THE TRANSITION Transition Burden on Existing Capital Normative Issues Outline of a Transition Policy Macroeconomic Policy during the Transition Conclusion 9. THE NONBUSINESS SECTOR Owner-Occupied Housing and Consumer Durables Production by Governments, Nonprofits, and Households Patrolling the Boundaries of the Business Cash-Flow Tax Fiscal Federalism under the X Tax Conclusion Box: Taxation of Home Resales 10. THE VAT ALTERNATIVE Subtraction and Credit-Invoice VATs The Superiority of the VAT to the Retail Sales Tax Recent Discussion of VAT Using the VAT to Replace Other Taxes The "Easy" Stuff Monetary Policy and Other Transition Issues Governments and Nonprofits Implications for Social Security Combating the "Money Machine" Conclusion CONCLUSION NOTES REFERENCES INDEX ABOUT THE AUTHORS

ISBN: 9780844743943
ISBN-10: 0844743941
Audience: Tertiary; University or College
For Ages: 22+ years old
Format: Hardcover
Language: English
Number Of Pages: 222
Published: 16th May 2012
Dimensions (cm): 23.7 x 16.1  x 2.1
Weight (kg): 0.44