Working Paper: NBER ID: w4862
Authors: Don Fullerton; Diane Lim Rogers
Abstract: All government agencies charged with the responsibility of estimating distributional effects use annual income to classify households and one year's tax to characterize tax burdens. In this paper, we describe an alternative procedure to estimate lifetime tax burdens as proportions of lifetime income. To illustrate this model, we calculate lifetime effects of a uniform consumption tax and a wage tax. This kind of analysis can supplement existing annual analyses, since policymakers might want to insure both that current taxes reflect current ability to pay and that lifetime taxes reflect lifetime ability to pay.
Keywords: tax incidence; lifetime income; consumption tax; wage tax; distributional effects
JEL Codes: H22; H24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| uniform consumption tax (H29) | lifetime income (J17) |
| uniform consumption tax (H29) | tax burdens (H22) |
| bequests (D64) | tax burdens (H22) |
| present value of potential earnings (J17) | regressivity of consumption tax (H22) |
| replacement of existing taxes with consumption tax (H29) | distributional outcomes (D39) |
| replacement of existing taxes with wage tax (H29) | distributional outcomes (D39) |