Citations (16)


Footnotes (36)



The Uneasy Case for Capital Taxation

Edward J. McCaffery

USC Gould School of Law

September 2005

USC CLEO Research Paper No. C05-11
USC Law Legal Studies Paper No. 05-19

The traditional view of tax holds that consumption taxes fail to tax the yield to capital, whereas income taxes do, leading to John Stuart Mill's criticism of the income tax as a "double tax" on wealth that is saved. A better analytic understanding illustrates that there are two types of consumption taxes. A prepaid consumption or (equivalently) wage tax indeed ignores the yield to capital. But a consistent progressive postpaid consumption tax gets at such yield, at the individual level, when but only when the returns to capital are used to elevate lifestyles in material terms. Such a tax allows "ordinary" savings that move around labor earnings, in constant dollar terms, to different periods of an individual's life, such as times of retirement or heightened medical or educational needs. Because a progressive postpaid consumption tax falls on the yield to capital at the right time - when its use at the individual level becomes manifest - all other taxes on capital, such as capital gains, gift and estate, and corporate income taxes, can and should be repealed, in the name of fairness.

Number of Pages in PDF File: 41

Open PDF in Browser Download This Paper

Date posted: September 13, 2005  

Suggested Citation

McCaffery, Edward J., The Uneasy Case for Capital Taxation (September 2005). ; USC Law Legal Studies Paper No. 05-19. Available at SSRN: http://ssrn.com/abstract=802888 or http://dx.doi.org/10.2139/ssrn.802888

Contact Information

Edward J. McCaffery (Contact Author)
USC Gould School of Law ( email )
699 Exposition Boulevard
Los Angeles, CA 90089
United States
213-740-2567 (Phone)
213-740-5502 (Fax)

Feedback to SSRN

Paper statistics
Abstract Views: 1,405
Downloads: 180
Download Rank: 113,447
Citations:  16
Footnotes:  36

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.297 seconds