Do We Now Collect Any Revenue From Taxing Capital Income?

Roger H. Gordon, Laura Kalambokidis, Joel Slemrod

NBER Working Paper No. 9477
Issued in February 2003
NBER Program(s):Public Economics

The U.S. income tax has long been recognized as a hybrid of an income and consumption tax, with elements that do not fit naturally into either pure system. The precise nature of this hybrid has important policy implications for, among other things, understanding the impact of moving closer to a pure consumption tax regime. In this paper, we examine the nature of the U.S. income tax by calculating the revenue and distributional implications of switching from the current system to one form of consumption tax, a modified cash flow tax. Although earlier work had suggested that in 1983 such a switch would have cost little or no revenue at all, we calculate that in 1995 this switch would have cost $108.1 billion in tax revenues, suggesting that the U.S. income tax does impose some positive tax on capital income. The net gains from such a switch have a U-shaped pattern, with those in the lowest and highest deciles of labor income receiving the largest proportional gains, although those in the highest decile would have by far the largest absolute gains.

download in pdf format
   (283 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9477

Published: Gordon, Roger, Laura Kalambokidis and Joel Slemrod. "Do We Now Collect Any Revenue From Taxing Capital Income?," Journal of Public Economics, 2004, v88(5,Apr), 981-1009. citation courtesy of

Users who downloaded this paper also downloaded* these:
Gordon, Kalambokidis, and Slemrod w9535 A New Summary Measure of the Effective Tax Rate on Investment
Gordon and Slemrod Do We Collect Any Revenue from Taxing Capital Income?
Faccio and Zingales w23041 Political Determinants of Competition in the Mobile Telecommunication Industry
Gordon w1723 Taxation of Investment and Savings in a World Economy: The Certainty Case
Gordon and Dietrich Dietz w12292 Dividends and Taxes
NBER Videos

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

Contact Us