Richard Thompson Ainsworth

Boston University School of Law Working Paper 06-20


Biometric identifiers embedded in national identity cards puts a formerly impossible goal of consumption taxation within the grasp of policymakers for the first time. Never before has it been possible to design a broad-based, single rate consumption tax that is truly and independently progressive.

No consumption tax has ever had all three of the critical attributes of a progressive consumption tax: a broad base, a single rate, and measured relief for those in greatest need. Although economists have urged that a broad base and a single rate be pursued over progressivity, most consumption taxes instead seek progressivity at the expense of both base and rate considerations. The reason is entirely political. Popular acceptance of a consumption tax frequently requires the mitigation of a perceived unfairness, the unfairness that arises when the poorest members of society are required to pay tax when they purchase necessities.

The essential problem (under the current system) is that when tax relief is granted it is universal not surgical. With each universal exemption – tax practice compromises tax theory. Technology offers policymakers a surgical option.

The three critical technology-intensive developments that facilitate the surgical option are:
- biometric identifiers embedded in national identity “smart cards”
- fully digital consumption tax regimes,
- certified compliance software
These developments taken together make it possible to grant relief to select individuals (the poor or the handicapped, for example), within the context of a broad-based, single rate tax. This paper examines each of these factors. A concluding section assesses the opportunity and set out a proposal to resolve regressivity in consumption taxes, based on the technology before us.

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Richard Thompson Ainsworth Contact Information
LL.M. Tax Program
Boston University School of Law
765 Commonwealth Ave
Boston, MA 02215

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