Ch16 TAXES ON CONSUMPTION AND SALES（课件）- 《财政金融英文版》同步教学（人民大学版）

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 deposit