Distributional Effects of Adopting a National Retail Sales Tax

64 Pages Posted: 12 Jul 2000 Last revised: 4 Oct 2010

See all articles by Daniel R. Feenberg

Daniel R. Feenberg

National Bureau of Economic Research (NBER)

Andrew Mitrusi

National Bureau of Economic Research (NBER)

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Date Written: January 1997

Abstract

This paper describes a new household-level data file based on merged information from the IRS Individual Tax File, the Current Population Survey, the National Medical Expenditure Survey, and the Consumer Expenditure Survey. This new file includes descriptive data on household income as well as consumption. The data file can be linked to the NBER TAXSIM program and used to evaluate the distributional effects of changing the federal income tax code, as well as the distributional effects of replacing the individual income tax with a consumption tax. We use this data file to analyze the long-run distributional effects of adopting a national retail sales tax that raises enough revenue to replace the current federal individual income tax and corporation income tax, as well as federal estate and gift taxes. Our results highlight the sensitivity of the change in distributional burdens to provisions such as lump sum transfers, sometimes called 'demogrants,' the retail sales tax plan, and to the choice between income and consumption as a basis for categorizing households in distribution tables.

Suggested Citation

Feenberg, Daniel R. and Mitrusi, Andrew and Poterba, James M., Distributional Effects of Adopting a National Retail Sales Tax (January 1997). NBER Working Paper No. w5885. Available at SSRN: https://ssrn.com/abstract=225667

Daniel R. Feenberg (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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617-588-0343 (Phone)

Andrew Mitrusi

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

James M. Poterba

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-350
Cambridge, MA 02142
United States
617-253-6673 (Phone)
617-253-1330 (Fax)

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