Distributional Effects on a Lifetime Basis

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All government agencies charged with the responsibility of estimating distributional effects use annual income to classify households and one year's tax to characterize tax burdens. In this paper, we describe an alternative procedure to estimate lifetime tax burdens as proportions of lifetime income. To illustrate this model, we calculate lifetime effects of a uniform consumption tax and a wage tax. This kind of analysis can supplement existing annual analyses, since policymakers might want to insure both that current taxes reflect current ability to pay and that lifetime taxes reflect lifetime ability to pay.

Published: Distributional Analysis of Tax Policy, ed. by David F. Bradford Washington, DC: American Enterprise Institute Press, 1995, pp. 262-294.

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