consumed-income tax

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Consumed-Income Tax

A tax only on income that one spends on goods and services. A common example of a consumed-income tax is a sales tax. Most countries have consumed-income taxes at some level and proposals exist in the United States to shift from a mainly progressive tax system to a system that utilizes consumed income taxes predominantly or exclusively. Proponents of a consumed-income tax argue that it encourages saving and makes the economy more efficient, while opponents maintain that it adversely affects the poor, who must by necessity spend more of their income.

consumed-income tax

A tax levied only against the part of income that is spent. Proponents of this type of taxation contend that exempting the portion of income that is saved will encourage savings, provide funds for investment, and make the economy more productive.
References in periodicals archive ?
The consumption tax proposals considered and analyzed include direct consumption taxes (like a consumed income tax and yield exemption tax), indirect consumption taxes (like a retail sales tax and various forms of value added taxes), and combinations of the two (like the Flat Tax, X Tax, and E Tax proposals), which involve a two-tier tax structure.
They are (1) a consumed income tax, (2) a value added tax (VAT), which could take the form of a subtraction method VAT, a credit invoice VAT, or a retail sales tax (RST), which is analytically equivalent to a VAT, (3) a two-tier consumption tax based on a VAT, and (4) a yield exemption tax.
The consumed income tax and yield exemption tax are direct consumption taxes, because the tax is imposed directly on the individual taxpayer.
Consumed income tax, such as the unlimited savings allowance (USA) tax.
The proposals described below are all, in fact, variations on the consumed income tax plan described almost twenty years ago in Blueprints for Basic Tax Reform, a study directed by David F.
The bill replaces the current individual and corporate federal income tax with a flat tax modeled after the consumed income tax proposals by Stanford Economist Robert Hall and Alvin Rabushka of the Hoover Institution.
Most commentators conclude that replacement of the current hybrid income tax with a consumed income tax would simplify the law.
This makes taxes such as a valued added tax, a national sales tax, a consumed income tax, or a similar consumption tax, much more a current issue for discussion than might have been considered possible a few years ago.
Rather, under a cash-flow or consumed income tax system, we would measure the amount of cash that the taxpayer received.
Opponents also argue that a cash-flow or consumed income tax would present formidable transition problems.
107) In that manner, the consumed income tax would levy the tax directly on consumption.
The analysis of a consumption tax often focuses on the cash flow consumed income tax because it can be collected, mechanically, in a manner similar to the current income tax.