Title

Generalized Cash Flow Taxation

Author(s)

Alan J. Auerbach Alan Auerbach (University of California, Berkeley, and NBER)

David F. Bradford David Bradford (Princeton University, NYU School of Law, NBER and CESifo)

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 cashflow 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.

Creation Date

2001-05

Section URL ID

CEPS

Paper Number

69

URL

https://gceps.princeton.edu/wp-content/uploads/2017/01/69bradford.pdf

File Function

Jel

H24

Keyword(s)

Suppress

false

Series

3