Life Cycle versus Annual Perspectives on the Incidence of a Value Added Tax

This paper analyzes the steady-state distribution of tax burdens of a Value Added Tax (VAT) in the United States using a lifetime perspective. In contrast to an annual snapshot perspective, I find that a VAT on total expenditures would be proportional over the lifetime. Various modifications to the VAT (zero rating necessities or lump-sum household rebates) would increase the progressivity of the tax substantially. However, the additional progressivity comes at the cost of substantial tax revenue.