Tax Reform - VAT levies a tax at each arrow explicitly...

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PAM 2040 Tax Reform
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What would make the tax code  better ? Increase Compliance? Simplification? Increase efficiency?
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Compliance Tax  avoidance Investment Invest in “renewable energy” Buy $1000 of windmills $300 tax credit Sell windmills for $800 $200 capital loss-> save $100 in taxes Behavior
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Optimal Compliance Dollars not reported Dollars  E*
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Consumption Taxes Replace taxes based on  contribution  with those  based on  extraction Compliance, Simplicity, Efficiency?
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Consumption Taxes Consumption tax in practice:  V alue  A dded  T ax Most production “chains” have many links Supplier 1   Supplier 2  Supplier 3   Consumer
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Unformatted text preview: VAT levies a tax at each arrow explicitly taking cascading into account The VAT The Hall-Rabushka Flat Tax Corporations pay a flat VAT, deducting wages from tax base Individuals pay a flat rate of earned income One family-level exemption For example: Firm pays (sales-purchases-wages)*0.19 Workers pay (wages-exemption)*0.19 The H-R Flat Tax Implementing Tax Reform Political Economy Median Voter vs. Logrolling Economic Tax capitalization Transitional inequalities...
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Tax Reform - VAT levies a tax at each arrow explicitly...

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