Is a Value Added Tax Progressive? Annual Versus Lifetime Incidence Measures

36 Pages Posted: 8 Jun 2004 Last revised: 29 Jun 2010

See all articles by Erik Caspersen

Erik Caspersen

Independent

Gilbert E. Metcalf

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

Date Written: June 1993

Abstract

We measure the lifetime incidence of a value added tax (V AT) using income data from the Panel Study of Income Dynamics (PSID) and consumption data from the Consumer Expenditure Survey (CEX). When annual income is used as a measure of economic well-being, a VAT looks quite regressive. However, the results change significantly when the analysis is done using lifetime income. Using two different measures of lifetime income, we find that a VAT in the United States would be proportional to slightly progressive over the lifetime.

Suggested Citation

Caspersen, Erik and Metcalf, Gilbert E., Is a Value Added Tax Progressive? Annual Versus Lifetime Incidence Measures (June 1993). NBER Working Paper No. w4387. Available at SSRN: https://ssrn.com/abstract=406043

Erik Caspersen

Independent

No Address Available

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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