The X Tax is an approach to taxation conceived by
Princeton University
Princeton University is a private university, private Ivy League research university in Princeton, New Jersey, United States. Founded in 1746 in Elizabeth, New Jersey, Elizabeth as the College of New Jersey, Princeton is the List of Colonial ...
economist and
New York University School of Law
The 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 was the first law school established in New York City and is the oldest survivin ...
professor
David F. Bradford, It consists of two taxes:
* The corporate tax component, referred to as the ''business cash flow tax'', levies taxes on company sales while excluding material expenses and wages. Unlike traditional
corporate income tax
A corporate tax, also called corporation tax or company tax or corporate income tax, is a type of direct tax levied on the income or capital of corporations and other similar legal entities. The tax is usually imposed at the national level, but i ...
, firms are able to immediately expense all capital investment (called "full expensing"). This ensures that ''normal profit'' is out of the tax base and only
super-normal profits are taxed.
* The personal tax component, is a
progressive payroll tax
Payroll taxes are taxes imposed on employers or employees. They are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the ...
with the highest payroll bracket taxed at the same rate as the business cash flow tax.
The reason an X Tax is considered to be a
consumption tax
A consumption tax is a tax levied on consumption spending on goods and services. The tax base of such a tax is the money spent on Consumption (economics), consumption. Consumption taxes are usually indirect, such as a sales tax or a value-added ta ...
is because, unlike the
income tax
An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...
, it doesn't introduce a "double-tax on savings."
The X Tax is intended to streamline the tax code, foster economic expansion, and preserve progressive taxation. Additionally, it seeks to stimulate savings and investments by eliminating double taxation. Under the X Tax,
financial transaction
A financial transaction is an Contract, agreement, or communication, between a buyer and seller to exchange goods, Service (economics), services, or assets for payment. Any transaction involves a change in the status of the finances of two or mo ...
s and
instruments
Instrument may refer to:
Science and technology
* Flight instruments, the devices used to measure the speed, altitude, and pertinent flight angles of various kinds of aircraft
* Laboratory equipment, the measuring tools used in a scientific lab ...
are not subject to taxation for both individuals and corporations. Bradford argues that "the government should exempt from taxation all
dividends
A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...
,
interest
In finance and economics, interest is payment from a debtor 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 distinct f ...
, 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. F ...
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 ...
. 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
*
Destination-based cash flow tax, a tax proposal that is similar to the corporate portion of the X tax
*
FairTax
FairTax is a flat tax, fixed rate sales tax proposal introduced as bill H.R. 25 in the United States Congress every year since 2005. The ''Fair Tax Act'' calls for elimination of the Internal Revenue Service and repeal the Sixteenth Amendment ...
*
Income tax in the United States
The United States federal government and most State governments in the United States, state governments impose an income tax. They are determined by applying a tax rate, which Progressive tax, may increase as income increases, to taxable incom ...
*
Taxation in the United States
The United States has separate Federal government of the United States, federal, U.S. state, state, and Local government in the United States, local governments with taxes imposed at each of these levels. Taxes are levied on income, payroll, ...
*
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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