Simplifying the Transition to a (Progressive) Consumption Tax

Posted: 8 May 2003

See all articles by Mitchell L. Engler

Mitchell L. Engler

Benjamin N. Cardozo School of Law

Michael S. Knoll

University of Pennsylvania Law School; University of Pennsylvania Wharton School -- Real Estate Department

Abstract

The existing personal income tax is seriously flawed as it is riddled with systematic loopholes. A consumption tax appeals as a way to reduce the current tax avoidance and evasion opportunities. Despite the obvious advantages of consumption taxation, the existing income tax remains in place. Transitional difficulties in shifting from the current tax to a consumption tax help to explain this result. This article discusses how a recently-proposed new form of consumption taxation significantly alleviates these transitional difficulties. Unlike the conventional (cash-flow) consumption tax, the new consumption tax design would maintain tax collections on saved wages. The recent proposal thereby avoids the contentious transition issues arising from the elimination of tax collections on saved wages under the conventional consumption tax.

Keywords: Consumption tax, Income tax

Suggested Citation

Engler, Mitchell L. and Knoll, Michael S., Simplifying the Transition to a (Progressive) Consumption Tax. Southern Methodist University Law Review, Vol. 56, No. 53, 2003. Available at SSRN: https://ssrn.com/abstract=405720

Mitchell L. Engler (Contact Author)

Benjamin N. Cardozo School of Law ( email )

55 Fifth Ave.
New York, NY 10003
United States
(212) 790-0217 (Phone)
(212) 790-0205 (Fax)

Michael S. Knoll

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-6190 (Phone)
215-573-2025 (Fax)

University of Pennsylvania Wharton School -- Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States

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