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

91 Pages Posted: 4 Mar 2009 Last revised: 12 Feb 2012

Chris William Sanchirico

University of Pennsylvania Law School; University of Pennsylvania Wharton School - Business Economics and Public Policy Department

Date Written: March 4, 2009

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.

See also, Sanchirico, Chris William, A Counter-Reply to Bankman and Weisbach (June 20, 2011). Tax Law Review, Vol. 64, No. 4, pp. 551-561, 2011; Available at SSRN: http://ssrn.com/abstract=1907330.

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

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

Suggested Citation

Sanchirico, Chris William, A Critical Look at the Economic Argument for Taxing Only Labor Income (March 4, 2009). Tax Law Review, Vol. 63, p. 867, 2010; U of Penn, Inst for Law & Econ Research Paper No. 09-08. Available at SSRN: https://ssrn.com/abstract=1353322

Chris William Sanchirico (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-4220 (Phone)

HOME PAGE: http://www.law.upenn.edu/faculty/csanchir/

University of Pennsylvania Wharton School - Business Economics and Public Policy Department

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

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