Haig-simons_income

Haig-Simons income or Schanz-Haig-Simons income is a measure of economic income that was developed by German economist Georg von Schanz. His concept was published in the Finanzarchiv 13(1) 1896, and further developed by the american economists Robert M. Haig and Henry C. Simons in the 1920s and 1930s. It defines economic income as

C + ΔW

where C = consumption and ΔW = change in wealth.

Here, broadly speaking, consumption refers to the purchase or acquisition of goods and services of any kind. From a perfect theory view, consumption does not include capital expenditures and the full spending would be amortized.

Tax on Haig-Simons Income

Tax on change in wealth

The Haig-Simons equation is different from the USA\'s tax base calculations. For example, any employer contributions to employee health insurance are not included in taxable employee income. Under the Haig-Simons definition of income, it would be included. The major reason why this method was not adopted by the United States is because of the complexities it creates. Gruber, Jonathan: "Public Finance and Public Policy", page 499. Worth Publishers,2005

Tax on consumption

The European Union and most states in the USA employ a tax on Haig-Simons income with a consumption tax. In the European Union, a value added tax applies to purchases of goods and services on each level of exchange until it reaches the ultimate consumer. In the US, most states tax purchases of goods with a sales tax.

See also

• Flat tax on consumption

References

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