Fairness and a Consumption-Type or Cash Flow Personal Income Tax

Abstract

In a recent article, Professor William Andrews proposed rejection of the accretion tax ideal in favor of a consumption-based tax scheme. One of his reasons for preferring the consumption-type tax model was its neutrality between persons who spend their income currently and those who save for future consumption. In this Comment, Professor Warren suggests that the neutrality of the consumption-type tax is obtained at the cost of allowing income from wealth to escape taxation. Finding the consumption-based tax to be analagous, if not identical, to a tax on wages alone, he rejects it as an insufficient compromise of the various legitimate objectives of a basic tax system.