NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?

Andrew B. Lyon, Robert M. Schwab

NBER Working Paper No. 3932
Issued in December 1991
NBER Program(s):   PE

In this paper we construct measures of tax incidence over the life-cycle and compare these measures to traditional measures based on annual data. We show that annual measures of the incidence of taxes on consumption goods may differ from life-cycle measures for three reasons. First, annual measures of income reflect transitory components which should have smaller effects on consumption than permanent changes in income. Second, income measured in a single period differs from lifetime income due to age-related differences in earnings. Third, consumption of certain items follows life-cycle patterns independent of changes in income. Surprisingly, we find that these effects cause almost no change in the assessment of the incidence of taxes applying to the consumption of cigarettes. For alcohol, however, we find that a tax on its consumption is slightly less regressive when measured with respect to lifetime income than when measured with respect to annual income.

download in pdf format
   (266 K)

download in djvu format
   (218 K)

email paper

This paper is available as PDF (266 K) or DjVu (218 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3932

Published: Review of Economics and Statistics, Vol. 77, no. 3 (1995): 389-406. citation courtesy of

Users who downloaded this paper also downloaded these:
Ayyagari, Deb, Fletcher, Gallo, and Sindelar w15124 Sin Taxes: Do Heterogeneous Responses Undercut Their Value?
Poterba w2833 Lifetime Incidence and the Distributional Burden of Excise Taxes
Poterba Is the Gasoline Tax Regressive?
Caspersen and Metcalf w4387 Is A Value Added Tax Progressive? Annual Versus Lifetime Incidence Measures
Metcalf Life Cycle versus Annual Perspectives on the Incidence of a Value Added Tax
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us