The X tax is an approach to taxation, United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, that can be described as a standard European-style
credit-invoice value added tax

Value added tax

A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...

 (VAT), except that wages are deducted by businesses and taxed at progressive

Progressive tax

A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate...

 rates to workers. Businesses are taxed on gross receipts

Gross receipts tax

A gross receipts tax or gross excise tax is a tax on the total gross revenues of a company, regardless of their source. A gross receipts tax is similar to a sales tax, but it is levied on the seller of goods or service consumers...

 and individuals taxed on wages, with neither businesses or individuals paying tax on financial transactions or financial instruments

Financial instruments

A financial instrument is a tradable asset of any kind, either cash; evidence of an ownership interest in an entity; or a contractual right to receive, or deliver, cash or another financial instrument....

. The plan was created by Princeton University

Princeton University

Princeton University is a private research university located in Princeton, New Jersey, United States. The school is one of the eight universities of the Ivy League, and is one of the nine Colonial Colleges founded before the American Revolution....

 economist and New York University School of Law

New York University School of Law

The New York University School of Law is the law school of New York University. Established in 1835, the school offers the J.D., LL.M., and J.S.D. degrees in law, and is located in Greenwich Village, in the New York City borough of Manhattan....

 professor David F. Bradford

David Bradford (economist)

David F. Bradford was a prominent American economist and professor of economics and public affairs in the Woodrow Wilson School at Princeton University....

.

Bradford states the X tax could alleviate the complexities and avoidance issues plaguing the existing U.S. system, and argues that "the government should exempt from taxation all dividends, interest

Interest

Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....

, and other income

Income

Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...

 from savings. 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."

External links

• Bradford's Princeton Homepage, Woodrow Wilson School Princeton University
• Bradford's Working Papers, National Bureau of Economic Research