BY: DAVID J. SHAKOW
University of Pennsylvania Law School
REED SHULDINER
University of Pennsylvania Law School
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=169728
Paper ID: University of Pennsylvania Law School, Institute for
Law and Economics, Working Paper No. 266
Date: September 1998
Contact: DAVID J. SHAKOW
Email: Mailto:dshakow at oyez.law.upenn.edu
Postal: University of Pennsylvania Law School
3400 Chestnut Street
Philadelphia, PA 19104-6204 USA
Phone: (215)898-6190
Fax: (215)573-2025
Co-Auth: REED SHULDINER
Email: Mailto:rshuldin at oyez.law.upenn.edu
Postal: University of Pennsylvania Law School
3400 Chestnut Street
Philadelphia, PA 19104-6204 USA
Paper Requests:
Contact Donna Gallagher, Institute for Law and Economics,
University of Pennsylvania Law School, 3400 Chestnut St.,
Philadelphia, PA 19104. Phone:(215)898-7719. Fax:(215) 573-2025.
Mailto:dgallagh at law.upenn.edu
ABSTRACT:
Income, consumption, and wealth are all possible bases for a tax
system in the United States. Scholars have specified the
structure of income tax and consumption taxes, but no one has
attempted to describe in detail a comprehensive wealth tax for
the United States. In this paper, we begin to develop such a
structure. In particular, we hypothesize that the combination of
a flat rate tax on networth and a flat rate tax on earned income
along with an appropriate level of exemptions, could be an
attractive tax base.
In order to explore the structure of a wealth tax, we first
specify the base of the tax. Using the Federal Reserve Boardís
Survey of Consumer Finances we then estimate the tax rates that
would be needed to raise the same revenue as currently raised by
the personal and corporate income tax. We find that rates of
1.57% on net worth and 17.7% on earned income would be required.
We also explore the rates that would be required under
alternative specifications of the base.
Once we have specified the base and the rates, using the SCF
data we are then able to explore the distribution of the tax by
income class. We compare the distribution to the distribution of
the current Federal income tax. We find that the wealth tax we
describe is able to achieve the same level of progressivity over
much of the income range.
JEL Classification: H21