Tax reform is a recurrent topic, but most of the prevailing proposals are fail to promote either efficiency or equity. In this paper, we consider an alternative reform, a consumption tax reform. The results show that aggregate capital, labor and consumption are improved by replacing a labor income tax with a consumption tax. Moreover, a progressive consumption tax alone can achieve a significant welfare gain, and the welfare gap between the rich and the poor is reduced.
Qian Li. "Welfare Effect of Consumption Taxes." Proceedings of the New York State Economics Association. vol. 5, October 2012, p. 117-128
BibTeX entry download