EconPapers    
Economics at your fingertips  
 

Taxing Consumption and Other Sins

James Hines ()

Journal of Economic Perspectives, 2007, vol. 21, issue 1, 49-68

Abstract: Federal and state governments in the United States use income and payroll taxes as their primary tools to collect revenue. Relative to the United States, governments in the rest of the world rely much more heavily on taxing consumption. Heavy American reliance on income rather than consumption taxation has not served the U.S. economy well. The inefficiency associated with taxing the return to capital means that the tax system reduces investment in the United States and distorts intertemporal consumption by Americans. While the economic logic of consumption taxation is compelling even for a closed economy, it is even more powerful for an open economy exposed to the world capital market. Consumption taxes in the form of excises can be designed to help protect the environment and control other externalities. Excise taxes can also serve the function of more closely aligning tax burdens with the benefits that taxpayers receive from certain government services. Understandable concerns arise about the distributional consequences of consumption taxation, but a system that relies heavily on consumption taxes, particularly if accompanied by an income tax, can be as progressive as any income tax the United States would realistically want to adopt.

Date: 2007
Note: DOI: 10.1257/jep.21.1.49
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/jep.21.1.49 (application/pdf)

Related works:
Working Paper: Taxing Consumption and Other Sins (2006) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:21:y:2007:i:1:p:49-68

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2019-07-22
Handle: RePEc:aea:jecper:v:21:y:2007:i:1:p:49-68