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A Distributional Analysis of the FairTax Plan: Annual and Lifetime Income Considerations

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  • Yingxu Kuang
  • Ted Englebrecht
  • Otis W. Gilley

Abstract

Dissatisfaction with the current federal tax system is fostering serious interest in the FairTax Plan, which would replace most of the federal taxes with a national retail sales tax. The FairTax is promoted as being progressive, but there is considerable skepticism of this claim. We examine the distributional effects of the FairTax, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity suggest that the current federal tax system is progressive while the FairTax is regressive. Our results are also robust to different assumptions used for estimation.

Suggested Citation

  • Yingxu Kuang & Ted Englebrecht & Otis W. Gilley, 2011. "A Distributional Analysis of the FairTax Plan: Annual and Lifetime Income Considerations," Southern Economic Journal, John Wiley & Sons, vol. 78(2), pages 358-381, October.
    • Handle: RePEc:wly:soecon:v:78:y:2011:i:2:p:358-381
    DOI: 10.4284/0038-4038-78.2.358
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    Cited by:

    1. William Gale & Kyle Pomerleau, 2023. "Consumption Taxes: The Good, The Bad, And The Unworkable," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(3), pages 846-852, June.

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