DISTRIBUTIONAL ASPECTS OF A FEDERAL VALUE-ADDED TAX

To many policymakers, a Federal valueadded tax presents a way to reduce the budget deficit without adversely affecting savings. In previous debates the regressivity of the tax has proven to be a significant barrier to its political acceptability. Using a newly-developed measure of income, this paper...

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Bibliographic Details
Published in:National tax journal 1988-06, Vol.41 (2), p.155-174
Main Authors: BRASHARES, EDITH, SPEYRER, JANET FURMAN, CARLSON, GEORGE N.
Format: Article
Language:English
Subjects:
Ability to pay principle
Analysis
Consumption
Consumption taxes
Corporate income taxes
Federal taxes
Fiscal policy
Income taxes
Low income
Low income groups
Poor
Poverty
Reimbursement
Sales taxes
Tax base
Tax rates
Taxation
Transfer payments
United States
Value added tax
Value added taxes
VAT
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Summary:To many policymakers, a Federal valueadded tax presents a way to reduce the budget deficit without adversely affecting savings. In previous debates the regressivity of the tax has proven to be a significant barrier to its political acceptability. Using a newly-developed measure of income, this paper evaluates the regressivity argument and analyzes options for reducing the regressivity of this tax. The paper concludes that the tax burden on the lower income groups can be reduced most effectively by providing payments to lower income groups, rather than by relying solely on automatic transfer payment adjustments or on exempting "necessities."
ISSN:0028-0283
1944-7477
DOI:10.1086/NTJ41788719