资源简介

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TAXES ON CONSUMPTION
AND SALES
C h a p t e r 16
Consumption as a Tax Base
General tax on consumption equivalent to an income tax that allows savings to be excluded from the tax bases
Annual comprehensive consumption is annual comprehensive income minus annual savings
Dominant form of taxation of consumption in the U.S. is retail sales tax
Accounts for about 1/3 of aggregate state government revenues
Federal government taxes consumption mainly through use of excise taxes
The Expenditure Tax
Comprehensive consumption tax, sometimes called an “expenditure tax”, would work like an income tax that allows exclusion of retirement savings from the tax base
All savings, without limit, no matter for what purpose, would be excluded from income
No tax penalty for withdrawing funds from savings
Tax paid only when funds are converted to cash and spent
Consumption Versus Saving
Can be argued that ability to pay more appropriately measured by a person’s basic capacity to earn income
On basis of horizontal equity, two people with equal potential to earn should pay same amount of taxes over their lifetimes
Would be taxed differently according to the way they differ in tendencies to defer consumption
One who saves nothing is taxed entirely on basis of labor income; one who prefers to save pays taxes both on labor earnings and income from accumulated capital
Comprehensive Consumption Tax Base
Comprehensive consumption tax base excludes any change in net worth from the tax base.
Under consumption tax, measuring realized or unrealized capital gains is unnecessary; would not be taxed until converted to cash and spent.
Under consumption tax, inflation not a problem as only current expenditures are taxed.
Anything that increases net worth of taxpayer would be excluded from tax base:
Savings accounts at financial institutions, business inventories, stocks and bonds
Cash-Flow Tax
Modified form of a general consumption tax
Savers would be permitted to deduct from their income funds deposited in qualified accounts
Would allow taxpayers to deduct from AGI all savings deposited in qualified accounts
Loans would be added to AGI as received but would be deducted from income as they are repaid
Administrative mechanism exists to implement similar form of expenditure tax; difficult transition problems could be posed
Flat-Rate Consumption v. Flat-Rate Income Tax
If both raise same revenue and saving is positive, then tax rate under consumption tax would be higher
Tax base is smaller under consumption tax
Interest rate not affected by consumption tax
No excess burden between current and future consumption
Income tax, however, taxes interest as it accrues and results in loss in efficiency
Reallocation of resources between current, future use
Consumption Versus Income Tax
Labor Market Efficiency
Gains from achieving efficiency in market for loanable funds balanced with possible additional losses in labor markets
Higher tax rate for consumption tax decreases return to work effort, induces efficiency losses in labor market from distortion of work-leisure choice
Substitution of consumption for income tax increases effective tax on wages, shifts down wages received at all hours of work
Labor Market Efficiency
Incidence of Consumption Tax
Because capital income excluded from taxation under consumption tax, tax would be borne according to labor earnings
Portion borne by labor income could be shifted to consumers if workers adjusted work hours in response to tax
Consumption tax likely to be more regressive with respect to income than income tax
Though tax rate structure could be modified to achieve collectively chosen distribution of burden
Sales Taxes
Few sales taxes implemented to conform to comprehensive consumption tax base
Levied mostly on tangible goods, excluding things like professional services, haircuts, transportation, etc.
Many states exempt certain basic goods regarded as necessities
Food, grocery items, prescription drugs
Many consumption taxes levied on purchase of capital goods
Automobiles, consumer durables
Retail Sales Tax
Ad valorem levy of fixed percentage on dollar value of retail purchases made by consumers
Levied on consumption at its final stage, collected from businesses that make retail sales
Usually added to retail price of goods and services
In the U.S., is a state and local fiscal instrument, rather than national
Possible effect is loss of retail trade to neighboring jurisdictions with no or low sales tax
Broadening sales tax base can increase revenue
Issues in Sales Taxation
Services initially exempt from taxation for administrative reasons
As services command more and more of consumption, states in financial crisis forced to consider taxing services
Aging population can adversely affect states’ sales tax revenue while services exempt
As percentage of population over 65 increases, consumption more weighted to services, pharmaceuticals, etc., now exempt
Most states do not tax purchases by government agencies and nonprofits
E-commerce presents challenges in state sales taxation
Excise Taxes
Selective taxes levied on certain types of consumption activities
Distort choices among goods and services, result in efficiency losses to economy
Some designed to raise revenue, others intended to discourage particular consumption activities
Excise taxes on tires are to raise revenue; excise taxes on liquor largely to discourage consumption
Many consumption activities taxed are alleged to generate negative externalities or are considered luxury goods and services
Incidence of Sales, Excise Taxes
Argued that they are regressive with respect to income
Annual consumption expenditures, as percentage of annual income, higher for low-income taxpayers than high-income taxpayers
This has led many states to exempt certain items, such as food
Distribution of tax burden between buyers and sellers varies from state to state, ranges from 28% to 89% of burden borne by buyers
Turnover Taxes
Multistage sales taxes levied at some fixed rate on transactions at all levels of production
Effective tax rate conditioned by number of stages of production
Extremely productive levy, producing high, stable yields at low rates
Low rate believed to discourage tax evasion
Studies have shown it to be somewhat progressive
Effective rates on many food items lower than those on clothing and other manufactured goods
Value-Added Tax (VAT)
General tax on consumption levied on the value added to intermediate products by businesses at each stage of production
Value-added tax is difference between sales proceeds and purchases of intermediate goods and services over a certain period
Value Added = Total Transactions – Intermediate Transactions
= Final Sales = GDP
= Wages + Interest + Profiles + Rents + Depreciation
Not currently used by U.S. federal government
General tax on value added equivalent to tax on national product
Value-Added Tax (VAT)
Product-type VAT – allows no deduction from tax base, either for firm’s outlays on capital goods or for amortized deductions on such outlays
Income-type VAT – allows no deduction for cost of capital equipment in year of purchase, but permits deduction for annual depreciation over life of equipment
Consumption-type VAT – allows full cost of capital to be deducted in year of purchase
Used in most nations
Administration of VAT
Invoice method – payment of tax requires firm to maintain invoices on sales and purchases for each tax payment period (monthly, quarterly)
Tax Liability = Tax Payable on Sales – Tax Paid on Intermediate Purchases
= [(t)(Sales)] – [(t)(Purchases)]
= (t)(Total Sales – Total Intermediate Purchases)
= (t)(Value Added)
Firms that make capital purchases allowed additional tax credit for taxes paid on capital goods; tax liability of a firm that makes capital purchases in a given tax period would be:
Tax Liability = [(t)(Total Sales – Total Intermediate Purchases)]
– [(t)(Capital Purchases)]
= (t)(Total Sales – Total Purchases – Capital Purchases)
= (t)(Value added – Investment)
Administration of VAT
VAT typically rebated on export sales
Goods of nations that use the tax more competitive in international markets when they are exported to nations where there is no national sales tax
Imported products subject to VAT, increasing prices to domestic consumers
A criticism of VAT is that costs of administration and compliance high compared to other taxes
Estimated that administrative and compliance costs for new VAT in U.S. could be $8 billion per year
Standard VAT Tax Rates, 2009

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