NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Lifecycle vs. Annual Perspectives on the Incidence of A Value Added Tax

Gilbert E. Metcalf

NBER Working Paper No. 4619 (Also Reprint No. r1892)
Issued in January 1994
NBER Program(s):   PE

This paper analyzes the steady state distribution of tax burdens of a Value Added Tax (VAT) in the United States using a lifetime perspective. In contrast to an annual snapshot perspective, I find that a VAT on total expenditures would be proportional over the lifetime. Various modifications to the VAT (zero rating necessities or giving lump sum household rebates) would increase the progressivity of the tax substantially. However, the additional progressivity comes at the cost of substantial tax revenue.

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Document Object Identifier (DOI): 10.3386/w4619

Published: Tax Policy and the Economy, vol. 8, ed. James M. Poterba, MIT Press, 1994

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