We argue that a spending tax, as opposed to an income or wage tax, is the last best hope for a return to significantly more progressive marginal tax rates than obtain today. The simple explanation for this central claim looks to incentive effects, especially for rich people. High marginal tax rates under an income tax fall on and hence deter the productive activities of work and saving. High marginal rates under a wage tax fall on and hence deter the productive activity of work alone. But high marginal rates under a spending tax fall on and hence deter high-end spending, which is arguably a social bad, and do not necessarily deter the social goods of work and saving; indeed, a progressive spending tax may increase saving.
"The Last Best Hope for Progressivity in Tax"
Areas of Interest
Southern California Law Review