The X Tax in the World Economy

Reforming the Corporate Income Tax: The Case for a Hybrid Cash-flow Tax

“…In the case of the CFT, the two relevant considerations are the distinction between real and financial transactions, and the origin versus the destination basis on which to apply the tax. Bradford's (2001Bradford's ( , 2003Bradford's ( , 2004) support for the R tax seems to be based entirely on the view that, by ignoring financial transactions in determining cash flows, tax administration is made simpler. In reality, however, the differential tax treatments of real and financial transactions as required under the R tax amount to injecting a major non-neutrality into the system, from which the kind of complications it may entail could easily overwhelm whatever superficial simplicity that is afforded by not taking financial transactions into account.…”

“…21 Note that the variables R * (net trade 20 These problems go away because transactions with non-residents are not part of the base of a destination-based R tax. See Bradford (2004) for extended discussions of these issues. However, since the R tax excludes financial transactions from its base, thin capitalization problems would be absent under it regardless whether it is origin-or destination-based.…”

“…As already noted earlier, the R tax is the business tax component of comprehensive income tax reform proposals advanced by Bradford (2004) and Hall and Rabushka (1995), under both of which the PIT would be replaced by a wage tax (at progressive rates under the former and a flat rate under the latter). These proposals are intended to replace the taxation of income with that of consumption on an economy-wide basis.…”

“…It is also the version recently recommended by the U.S. Report of the President's Advisory Panel on Federal Tax Reform (2005). Finally, through a series of influential papers, Bradford (2001Bradford ( , 2003Bradford ( , 2004 has recently championed the R tax as the business tax component of his so-called "X" tax proposal (the personal tax component of the proposed X tax comprises a progressive wage tax).…”

The "Flat Tax(es)": Principles and Evidence

“…The origin-based VAT taxes exports but not imports, and so is a tax on goods produced within the country (in contrast to the usual destination-based form of VAT, under which exports are exempt and imports fully taxed, so that the base is ultimately domestic consumption) 4. And in the 'X-tax' ofBradford (2003), which differs from the HR flat tax in applying more than one positive tax rate to labor income (with the highest marginal rate of tax on labor income equal to the business tax rate) and, perhaps, the business tax levied on a destination basis (so that export sales are excluded, and import purchases non-deductible).…”