Income Taxes vs. Sales Taxes: A Welfare Comparison
Which tax structure — sales or income — is most preferred by the typical Missourian? Because both types of taxes are distortionary, it is difficult to tell whether welfare is higher under the system relying more heavily on the income tax or under the system relying more heavily on the sales tax. This essay uses quantitative methods built on logically consistent economic theory to compare welfare under the two alternative tax structures.