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1 Federal Non-Income Taxes: An Examination of Selected Revenue Sources 1 (1965)

handle is hein.tera/fnincosr0001 and id is 1 raw text is: FEDERAL NON-INCOME TAXES An Examination of Selected Revenue Sources 4' This is a summary of an 80-page study by the above title prepared by Tax Foundation. Copies of the study are available at a price of $1.50 per copy from the Foundation's office, 50 Rockefeller Plaza, New York, N.Y. 10020. The deficiencies of present income and excise taxes, relatively tolerable at low rates, can become oppressive at the high rates prevalent in today's tax structure. Alternative forms of taxation also have disadvantages. Their deficiencies, however, cannot be written off as obviously worse than those of current Federal taxes. The advantages and disadvantages of alterna- tive non-income taxes need examination in detail, and that is the purpose of the present study. Several types of taxation, not now used at the Federal level, are significant in the fiscal structure of other countries as well as in some U.S. state tax systems. These include the turnover or gross receipts taxes levied on sales at several, or sometimes all, stages of production and distribution. Single stage commodity taxes are feasible at any of three levels of sales: manu- facturers, wholesalers, and retailers. In recent years, the value-added tax, a so- phisticated variation of the turnover tax, has attracted much attention. At the per- sonal level, a quite different kind of tax is possible, namely a tax based on personal expenditures but levied on the individual. Economic Effects of Taxes The major economic effects of most taxes fall into one or more of five cate- gories: problems of incidence, resource al- location, equity, growth, and stability. The basic problem of incidence involves serious difficulties of definition and analy- sis. Effects of a given tax differ from in- dustry to industry depending on pricing practices, degree of competition, cost con- ditions, and institutional rigidities. The traditional analysis of the incidence of excise taxes indicates that the burden of excises is generally shifted forward to consumers. However, the classical anal- ysis was a partial approach to the prob- lem-it dealt with the effects of a tax in a single market or industry and assumed that effects in other sectors of the economy could be neglected. For an excise tax that affects a significant portion of the whole economy, an aggregate approach that will include repercussions in sectors of the economy not directly subject to the tax is called for. It has been shown that under certain conditions an excise tax may be shifted backward to suppliers of produc- tive resources in all sectors of the economy. The extent to which a tax may be shifted forward or backward requires fur- ther theoretical and empirical work. The question of equity introduces ad- ditional difficulties. How can we define those conditions under which taxpayers are in similar circumstances and therefore should be treated in the same way for tax purposes? How can we find acceptable ways of differentiating among taxpayers in different circumstances? There are no easy answers to these questions. One problem of equity concerns the de- gree of regressivity or progressivity in the distribution of the tax burden. Attempts to estimate the distribution of the burden of taxation rest on largely untestable as- sumptions about the incidence of taxation. However, on the assumption that much of the burden of sales and excise taxes is shifted to consumers, data are available to estimate the burden of such taxes. If a