The Choice between Income and Consumption Taxes: A Primer

46 Pages Posted: 14 Jul 2006 Last revised: 19 Aug 2010

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: June 2006

Abstract

It has now been nearly three decades since the publication of two important volumes that laid out many of the details of how one might implement a progressive consumption tax (Institute for Fiscal Studies, 1978; U.S. Treasury, 1977). Over the years since, many contributions have analyzed the mechanics of the different variants of consumption taxation, the potential efficiency and distributional effects of their adoption, the issues of administration and transition from the current tax system, and the problems relating to certain types of transactions. But much of what we %u201Cknow%u201D is not part of the general policy discussion and there are important issues that the literature has recognized but still not resolved. The aim of this paper is to lay out the key economic issues involved in deciding whether and how to adopt a consumption tax and to discuss what theory and evidence have told us and could tell us about these issues.

Suggested Citation

Auerbach, Alan Jeffrey, The Choice between Income and Consumption Taxes: A Primer (June 2006). NBER Working Paper No. w12307. Available at SSRN: https://ssrn.com/abstract=910839

Alan Jeffrey Auerbach (Contact Author)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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