Income versus Consumption Tax Baselines for Tax Expenditures

25 Pages Posted: 3 Oct 2008 Last revised: 22 Feb 2010

See all articles by Robert Carroll

Robert Carroll

American University - School of Public Affairs

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA); Georgetown University - Department of Economics

James B. Mackie III

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Date Written: February 19, 2010

Abstract

This paper explores the implications of evaluating income tax preferences, or tax expenditures, under a consumption tax baseline. First it examines the conceptual differences between income and consumption tax baselines. Next, an X-tax prototype of a consumption tax is employed to gauge the sensitivity of the estimates to the two baselines, i.e., current law income tax and the X-tax. The tax expenditure estimates for capital income preferences are vastly different under the two regimes.

Keywords: Tax Expenditures, Income Tax, Consumption Tax

JEL Classification: H23, H24

Suggested Citation

Carroll, Robert and Joulfaian, David and Mackie, James B., Income versus Consumption Tax Baselines for Tax Expenditures (February 19, 2010). National Tax Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1276467

Robert Carroll

American University - School of Public Affairs

Washington, DC 20016
United States

David Joulfaian (Contact Author)

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

Georgetown University - Department of Economics ( email )

37th St NW & O St NW
Washington, DC 20007
United States

James B. Mackie

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States
(202) 622-1326 (Phone)

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