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A Critical Look at the Economic Argument for Taxing Only Labor Income

Chris William Sanchirico
University of Pennsylvania Law School; University of Pennsylvania Wharton School - Business & Public Policy Department

Tax Law Review, Forthcoming
U of Penn, Inst for Law & Econ Research Paper No. 09-08

Abstract:
According to accepted wisdom, "the tax substitution argument" fairly establishes that it is best to tax only labor income, and not also income from savings and investment. In this Article, I show that the tax substitution argument - which is actually a disjointed collection of arguments - is variously incomplete, incorrect, and conclusory.

Keywords: Tax policy, equity and efficiency, optimal taxation, tax substitution argument, consumption tax versus income tax, Atkinson and Stiglitz, taxes versus legal rules

JEL Classifications: K34, D30, D31, D60, D61, D63, H00, H20, H21, J38, K00, K10

Accepted Paper Series

Date posted: March 04, 2009 ; Last revised: November 17, 2009

Suggested Citation

Sanchirico, Chris William, A Critical Look at the Economic Argument for Taxing Only Labor Income (March 4, 2009). Tax Law Review, Forthcoming; U of Penn, Inst for Law & Econ Research Paper No. 09-08. Available at SSRN: http://ssrn.com/abstract=1353322

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Contact Information

Chris William Sanchirico (Contact Author) University of Pennsylvania Law School ( email ) 3400 Chestnut Street Philadelphia, PA 19104-6204 United States 215-898-4220 (Phone) HOME PAGE: http://www.cstone.net/~csanchir
University of Pennsylvania Wharton School - Business & Public Policy Department Philadelphia, PA 19104-6372 United States

Abstract

Date posted: March 04, 2009 ; Last revised: November 17, 2009

Suggested Citation

Contact Information

Chris William Sanchirico (Contact Author)