Generalized cash-flow taxation |
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Authors: | Alan J Auerbach David F Bradford |
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Institution: | a Department of Economics, University of California, Berkeley, 549 Evans Hall #3880, Berkeley, CA 94720-3880, USA b Woodrow Wilson School, Princeton University, Princton, NJ 08544, USA |
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Abstract: | We show the unique form that must be taken by a tax system based entirely on realization accounting to implement a uniform capital income tax, or, equivalently, a uniform wealth tax. This system combines elements of an accrual based capital income tax and a traditional cash-flow tax, having many of the attributes of the latter while still imposing a tax burden on marginal capital income. Like the traditional cash-flow tax, this system may be integrated with a tax on labor income. We also show how such a tax can be supplemented with an optional accounting for a segregated subset of actively traded securities, subjected separately to mark-to-market taxation at the uniform capital income tax rate, to permit a fully graduated tax system applicable to labor income. |
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Keywords: | Cash-flow taxation |
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