Paul L. Caron

Thursday, March 13, 2008

Zelenak Presents The Federal Retail Sales Tax that Wasn't Today at Northwestern

Lawrence Zelenak (Duke) presents The Federal Retail Sales Tax that Wasn't: An Actual History and an Alternative History at Northwestern today as part of its Advanced Topics in Taxation Series organized by Charlotte Crane.  Here is the Conclusion:

Perhaps the story of the sales-tax-that-wasn’t lends some support to the Great Man theory of history. But for President Roosevelt’s condemnation of a retail sales tax – on distributional grounds which do not stand up under examination – the federal tax structure today might be very different. This article’s speculation concerning how the postwar federal tax system might have developed differently under the combination of a retail sales tax and a class income tax – even assuming the distributional equivalence of the two-tax system with the actual mass income tax as of the end of World War II – is not solely an exercise in alternative history for its own sake. In evaluating present-day proposals (such as that of Michael Graetz) to introduce a retail sales tax or VAT and to return the income tax to its class tax origins, it is necessary to consider more than the initial distribution of tax burdens under the proposal and the prospect of eliminating “100 Million Unnecessary Returns.” Even if the two-tax system at its inception is distributionally identical with the mass income tax it replaces, the effects of the change in later years may be wide-ranging indeed. Decades hence, everything from federal policy toward low-wage workers with children, to housing policy, to the overall distribution of the federal tax burden, may depend on whether the United States retains a mass income tax or returns the income tax to is more modest prewar status.

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