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Taxes on Consumption


Taxes on Consumption" Since the mid-1980s there have been 7,000 federal tax code changes and a 74 percent increase in the number of pages of tax rules in the US. Complying with federal tax requirements wastes 6 billion hours each year as families and businesses fill out tax forms, keep records, and learn tax rules. The key factor that causes rising income tax complexity is that the tax base is inherently difficult to measure. The Haig-Simons measure of income favored by many academic theorists is economically damaging and too impractical to use in the real world. As a result, policymakers have fallen back on ad hoc and inconsistent rules to define the income tax base. The complexity and inefficiency of the individual and corporate income taxes have led to great interest in replacing them with a consumption- based tax. The leading consumption-based tax proposals, including the national retail sales tax and the Hall-Rabushka flat tax, could dramatically simplify federal taxation. Those tax systems would eliminate many of the most complex aspects of federal taxation, including depreciation accounting and capital gains taxation. "Simplifying Federal Taxes. The Advantages of Consumption-Based Taxation" by Chris Edwards is published by the Cato Institute.


By Cato Institute , US.

Taxation Policy Resource.