Generalized Cash Flow Taxation

38 Pages Posted: 11 Apr 2001

See all articles by David F. Bradford

David F. Bradford

Princeton University, Woodrow Wilson School; NBER; CESifo (Center for Economic Studies and Ifo Institute)

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2001

Abstract

We show the unique form that must be taken by a tax system based entirely on realization accounting to implement a uniform capital income tax, or, equivalently, a uniform wealth tax. This system combines elements of an accrual based capital income tax and a traditional cash flow tax, having many of the attributes of the latter while still imposing a tax burden on marginal capital income. Like the traditional cash flow tax, this system may be integrated with a tax on labor income. We also show how such a tax can be supplemented with an optional accounting for a segregated subset of actively traded securities, subjected separately to mark-to-market taxation at the uniform capital income tax rate, to permit a fully graduated tax system applicable to labor income.

JEL Classification: H24, G11

Suggested Citation

Bradford, David F. and Auerbach, Alan Jeffrey, Generalized Cash Flow Taxation (February 2001). CESifo Working Paper Series No. 425. Available at SSRN: https://ssrn.com/abstract=265428

David F. Bradford (Contact Author)

Princeton University, Woodrow Wilson School ( email )

Department of Economics
Princeton, NJ 08544-1021
United States
609-258-1856 (Phone)
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NBER

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CESifo (Center for Economic Studies and Ifo Institute)

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Alan Jeffrey Auerbach

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-643-0711 (Phone)
510-643-0413 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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