551. Louis Kaplow, Capital Levies and Transition to a Consumption Tax, 6/2006; subsequently published in Institutional Foundations of Public Finance: Economic and Legal Perspectives, Alan J. Auerbach and Daniel N. Shaviro (editors), Harvard University Press, 2008, 112-146.
Abstract: The merits of capital levies depend on the likelihood of repetition, the extent of
anticipation, and its effects on distribution. The relevance of these features, which in varying
degrees is underdeveloped or underappreciated in pertinent literatures, is elaborated and then
considered with regard to the problem of transition to a consumption tax. Other transition issues
are distinguished, and specific attention is devoted to rate changes under a consumption tax and
whether owners of preexisting capital are effectively compensated through higher net-of-tax
returns due to repeal of the income tax. The analysis is also related to literature that examines
dynamic models of taxation, particularly work simulating consumption tax transitions and
assessing the optimality of capital taxation in the long run.