A Comparison of Sales Taxes

Ira Gang and Arindam Das-Gupta ()
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Arindam Das-Gupta: Rutgers University

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: We describe the simple analytics of the four main types of sales taxes under revenue neutrality: the retail sales tax, the value added tax, a cascading sales tax and a manufacturers' sales tax. The retail sales tax is shown to be equivalent to a value added tax. In order to produce equal revenues these two taxes must be at a higher rate than a cascading tax. However, output under a retail sales tax exceeds that under a cascading sales tax and deadweight losses are lower. The manufacturers' sales tax offers the worst of all worlds: with revenue neutrality the manufacturers' sales tax has a higher tax rate, lower output and greater deadweight loss than all the other taxes.

Keywords: deadweight loss; efficiency; retail; sales tax; VAT (search for similar items in EconPapers)
JEL-codes: H2 H21 H25 (search for similar items in EconPapers)
Date: 1998-07-23
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Citations: View citations in EconPapers (1)

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Journal Article: A Comparison of Sales Taxes (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:199519

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