Lifecycle vs. Annual Perspectives on the Incidence of a Value Added Tax

34 Pages Posted: 19 Dec 2000 Last revised: 17 Aug 2010

See all articles by Gilbert E. Metcalf

Gilbert E. Metcalf

Tufts University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1994

Abstract

This paper analyzes the steady state distribution of tax burdens of a Value Added Tax (VAT) in the United States using a lifetime perspective. In contrast to an annual snapshot perspective, I find that a VAT on total expenditures would be proportional over the lifetime. Various modifications to the VAT (zero rating necessities or giving lump sum household rebates) would increase the progressivity of the tax substantially. However, the additional progressivity comes at the cost of substantial tax revenue.

Suggested Citation

Metcalf, Gilbert E., Lifecycle vs. Annual Perspectives on the Incidence of a Value Added Tax (January 1994). NBER Working Paper No. w4619. Available at SSRN: https://ssrn.com/abstract=254000

Gilbert E. Metcalf (Contact Author)

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States
617-627-3685 (Phone)
617-627-3917 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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