The X tax is an approach to
taxation
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...
, suggested in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
, that can be described as a standard European-style
credit-invoice
value added tax
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the en ...
(VAT), except that
wages
A wage is payment made by an employer to an employee for work done in a specific period of time. Some examples of wage payments include compensatory payments such as ''minimum wage'', '' prevailing wage'', and ''yearly bonuses,'' and remuner ...
are deducted by businesses and taxed at
progressive rates to workers.
Businesses are taxed on
gross receipts and individuals taxed on wages, with neither businesses or individuals paying tax on
financial transactions
A financial transaction is an agreement, or communication, between a buyer and seller to exchange goods, services, or assets for payment. Any transaction involves a change in the status of the finances of two or more businesses or individuals. A ...
or
financial instruments
Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership interest in an entity or a contractual right to receive or deliver in the form ...
.
The plan was created by
Princeton University
Princeton University is a private research university in Princeton, New Jersey. Founded in 1746 in Elizabeth as the College of New Jersey, Princeton is the fourth-oldest institution of higher education in the United States and one of the ...
economist and
New York University School of Law
New York University School of Law (NYU Law) is the law school of New York University, a private research university in New York City. Established in 1835, it is the oldest law school in New York City and the oldest surviving law school in ...
professor
David F. Bradford.
Bradford states the X tax could alleviate the complexities and avoidance issues plaguing the existing U.S. system,
and argues that "the government should exempt from taxation all
dividends
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-in ...
,
interest
In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...
, and other
income
Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. Fo ...
from
savings
Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an I ...
. That way, people will be treated equally by the tax system, whether they choose to spend now or save to increase their future spending power."
See also
*
FairTax
FairTax was a single rate tax proposal in 2005, 2008 and 2009 in the United States that includes complete dismantling of the Internal Revenue Service. The proposal would eliminate all federal income taxes (including the alternative minimum t ...
*
Income tax in the United States
Income taxes in the United States are imposed by the federal government, and most states. The income taxes are determined by applying a tax rate, which may increase as income increases, to taxable income, which is the total income less allowa ...
*
Taxation in the United States
The United States of America has separate federal, state, and local governments with taxes imposed at each of these levels. Taxes are levied on income, payroll, property, sales, capital gains, dividends, imports, estates and gifts, as well as ...
*
Tax reform
Tax reform is the process of changing the way taxes are collected or managed by the government and is usually undertaken to improve tax administration or to provide economic or social benefits. Tax reform can include reducing the level of taxati ...
Notes
External links
*
Bradford's Working Papers National Bureau of Economic Research
*
Tax reform in the United States
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