Working Paper: NBER ID: w4619
Authors: Gilbert E. Metcalf
Abstract: This paper analyzes the steady state distribution of tax burdens of a Value Added Tax (VAT) in the United States using a lifetime perspective. In contrast to an annual snapshot perspective, I find that a VAT on total expenditures would be proportional over the lifetime. Various modifications to the VAT (zero rating necessities or giving lump sum household rebates) would increase the progressivity of the tax substantially. However, the additional progressivity comes at the cost of substantial tax revenue.
Keywords: Value Added Tax; Tax Incidence; Lifetime Perspective
JEL Codes: H21; H23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lifetime perspective (D15) | perceived regressivity of VAT (H25) |
| VAT design modifications (H25) | progressivity of VAT (H25) |
| lifetime income measures (J17) | proportionality of VAT (H25) |
| annual income measures (J31) | perceived regressivity of VAT (H25) |
| bequests treatment (D14) | proportionality of VAT (H25) |