Does the X-Tax Mark the Spot?

51 Pages Posted: 31 Oct 2002

See all articles by David A. Weisbach

David A. Weisbach

University of Chicago - Law School; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Multiple version iconThere are 2 versions of this paper

Date Written: September 24, 2002


This paper examines the implementation of two-tier consumption taxes, which are business-level VAT-like taxes with a progressive wage tax at the employee level and a wage credit or deduction at the business level. The focus is on a proposal known as the x-tax. The x-tax has many desirable features and is worth serious attention. Nevertheless, designing a workable two-tier system will be a challenge. The paper examines three issues in particular. First, the x-tax and all two-tier consumption taxes raise implementation problems because they must be origin-based under the GATT yet origin-based systems, it is argued, have significant avoidance problems. Second, the x-tax and most U.S. proposals purport to be based on the subtraction method. The credit invoice model, however, may be more appropriate. Finally, the paper discusses transition.

Keywords: Consumption tax, VAT, tax reform

JEL Classification: K0, K2

Suggested Citation

Weisbach, David, Does the X-Tax Mark the Spot? (September 24, 2002). U Chicago Law & Economics, Olin Working Paper No. 163. Available at SSRN: or

David Weisbach (Contact Author)

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-3342 (Phone)
773-702-0730 (Fax)

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics