Recent federal legislation, H.R. 25 and S. 25, calls for a national retail sales tax. This tax is intended to replace the existing federal individual and corporate income taxes, the payroll tax which is used to fund the Social Security trust fund, and the estate and gift tax. One of the goals of the national sales tax is to reduce the compliance burden associated with the existing federal incom...

Recent federal legislation, H.R. 25 and S. 25, calls for a national retail sales tax. This tax is intended to replace the existing federal individual and corporate income taxes, the payroll tax which is used to fund the Social Security trust fund, and the estate and gift tax. One of the goals of the national sales tax is to reduce the compliance burden associated with the existing federal incom...

We study an optimum-taxation model, where individuals differ not only in earning abilities, but also in inherited endowments. We show first that an expenditure tax (which is equivalent to a tax on endowments), combined with an optimum nonlinear income tax, is desirable according to a utilitarian social objective, if on average high-able individuals have larger endowments that low-able. Secondly...

This paper focuses on how inflation interacts with taxes and interest rates to affect capital formation.1 It uses a simple credit-market framework to explain how inflation magnifies the distorting effects of taxation when the tax treatment of interest income and expense is not fully indexed to inflation.2 The distortion involves a real tax wedge consisting of the difference between the real int...

We estimate the importance of household liquidity for the effect of the Car Allowance Rebate System (CARS) on vehicle transactions. We measure the average program impact by comparing households with “clunkers” eligible for CARS to households with similar vehicles that are ineligible. The liquidity provided by CARS contributed to its larger than anticipated take-up. Clunkers with existing loans,...

The neglect of administrative issues is a serious limitation of optimal tax theory, with implications for its practical applicability. We focus on an important class of administrative problems, namely that the tax bases are measured with some error. We also consider the full set of tax instruments. We find that consumption taxes can perform the ‘social insurance role of taxation’, a role previo...

Federal laws try to protect taxpayers and recipients of government benefits from the effects of rising prices by specifying that dollar amounts in many parts of the tax code and in some programs be automatically adjusted— or indexed—for inflation. Without such indexing, a rise in the general level of prices would alter the effects of federal policies even in the absence of action by lawmakers. ...

Recent Changes to the Railroad Retirement Act* The Social Security taxes shown are the employee taxes only and are derived by applying the combined OASDI and HI tax rates in the present law to the projected earnings amounts. The Federal income taxes shown are approximate and are based on a summary of the provisions of The Economic Recovery Tax Act of 1981 (Public Law 97-34). For the years 1985 ...

Public school finance mechanisms differ from state to state, and they are often extremely complex. Most commonly, the federal government contributes about 7% of the total school budget, and the remainder is split fairly evenly between local contributions (primarily raised through local property taxes) and state contributions (primarily raised through state income taxes and sales taxes). The ave...

States producing gas and oil have long levied severance taxes at the point of extraction, commonly placing most revenues into general funds. These taxes have assumed new meaning in many states amid the expansion of gas and oil production accompanying the advent of hydraulic fracturing. We reviewed all major statutes and constitutional amendments related to severance taxes that were enacted at t...