Economic Effects of A Personal Capital Income Tax Add-on to a Consumption Tax

John Diamond and George Zodrow ()

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: The general idea is the following: any tax authority that respects basic human rights has to impose taxes on a base to avoid random and arbitrary taxation. The tax base should be announced prior to the imposition of the tax and therefore, taxpayers are given an advanced warning concerning the tax base. The advanced warning enables the taxpayers to adjust the tax base to the new circumstances so that they can adjust their behavior to the existence of the tax. This adjustment of the tax base by the taxpayer is responsible to the excess burden of the tax. Retroactive taxes, that is taxes imposed on tax bases determined in the past and that, therefore, cannot be changed by the taxpayers are considered as unethical. Although the determination of the tax base is just the first stage in the taxation process- tax liability is determined by applying a rate or a schedule of rates to the base- most of the complications that arise in taxation (and as a result are responsible for administrative and compliance costs) arise in the determination of the tax base.

Keywords: Personal Capital Income Tax; Consumption Tax; tax bas; tax authority (search for similar items in EconPapers)
Pages: 28 pages
Date: 2007-06-01
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Economic Effects of a Personal Capital Income Tax Add-On to a Consumption Tax (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper0715

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