Does the X-Tax Mark the Spot?

Posted: 29 May 2003

See all articles by David A. Weisbach

David A. Weisbach

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

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The article examines the implementation of a two-tier consumption tax, which is a variation of a proposal made by David Bradford under the name x-tax. A two-tier consumption tax is a tax on consumption by imposing a progressive wage tax on individuals coupled with a cash-flow or VAT-like tax on businesses (and granting the businesses a wage deduction). The article argues that a two-tier consumption tax has many desirable features and is worth serious attention but acknowledges that designing a workable system is a challenge. The article focuses on three primary issues: problems that may arise under GATT because the two tier consumption tax must be origin-based under GATT, which may lead to significant avoidance problems; utilizing a credit invoice VAT rather than a subtraction method VAT; and transition issues that will need to be addressed in implementing a two tier consumption tax.

Keywords: Consumption tax, VAT, tax reform

JEL Classification: K0, K2

Suggested Citation

Weisbach, David, Does the X-Tax Mark the Spot?. SMU Law Review, Vol. 56, p. 201, 2003. Available at SSRN:

David Weisbach (Contact Author)

University of Chicago - Law School ( email )

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

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