Three Views of Tax

33 Pages Posted: 11 Feb 2005

See all articles by Edward J. McCaffery

Edward J. McCaffery

University of Southern California Gould School of Law

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Date Written: February 2005


Traditional tax policy has been locked in a seemingly all-or-nothing debate between two apparent extremes, income and consumption taxation. But there are three choices of a comprehensive tax system, not two. This is because, under progressive rates, the two canonical types of consumption tax (prepaid and postpaid) are not equivalent, as the traditional view of tax would have them be. Adding in a distinct third view of tax makes clear that the best system for effecting liberal redistribution is not an income tax at all but a specific form of a consumption tax, a consistent progressive postpaid one. And this is, in large part, because such a consumption tax best gets at the yield to capital, in just the way ordinary moral intuitions want to get at it.

Suggested Citation

McCaffery, Edward J., Three Views of Tax (February 2005). USC Law, Legal Studies Research Paper No. 05-3; USC Law School, Olin Research Paper No. 05-3; USC CLEO Research Paper No. C05-3. Available at SSRN: or

Edward J. McCaffery (Contact Author)

University of Southern California Gould School of Law ( email )

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