A Lifetime Income Tax

43 Pages Posted: 18 Feb 2005  

Herwig J. Schlunk

Vanderbilt University - Law School

Date Written: February 17, 2005

Abstract

Under current tax law, there can be considerable period-by-period divergence between a taxpayer's after-tax income and her desired or actual consumption. This divergence will cause the taxpayer to borrow. One can view such borrowing either as being incurred to fund consumption, or as being incurred to fund the taxpayer's income tax payments. If one takes the latter view, one can ask whether a good income tax law should force a taxpayer to borrow to pay her taxes. I answer the question in the negative, and propose a lifetime income tax that would eliminate the need for typical taxpayers to borrow to pay their income tax liabilities. Under such a regime, a typical taxpayer would reap an affirmative benefit over her lifetime, because she would be able to transfer borrowing from herself (a relatively inefficient borrower) to the government (a relatively efficient borrower).

Suggested Citation

Schlunk, Herwig J., A Lifetime Income Tax (February 17, 2005). NYU, Law and Economics Research Paper No. 02-06; Vanderbilt Law and Economics Research Paper No. 05-07. Available at SSRN: https://ssrn.com/abstract=668942 or http://dx.doi.org/10.2139/ssrn.668942

Herwig Schlunk (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-322-1527 (Phone)
615-322-6631 (Fax)

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