disadvantage is a higher burden among elderly, consuming primarily their past savings. Empirical evidence According to theory, taxes have two opposing effects on individual's work decisions, the net impact might thus be unclear. Empirical evidence shows that increased taxes cause a decrease in work effort, meaning the substitution effect is larger than the income effect. A study shows that a consumption tax is likely to decrease work effort more than an income tax, although the difference is expected to be minor. Tax burden of consumption tax Tax burden across income classes Consumption taxes are often criticised to be regressive, meaning the average tax rate decreases with increasing income. However, it depends on income measurement. If income is measured annually or monthly, consumption taxes are truly regressive, as higher-income individuals can afford to save more, thus reducing the tax base for consumption tax more significantly than lower-income individuals. But if lifetime income is used to measure the ability to pay, the burden tends to be more equitable as over a lifetime, lifetime consumption is a good approximation of lifetime income. Tax burden across age groups Because the tax base of consumption tax depends mostly on the ability to save money, it can be expected that middle-aged individuals will have the smallest tax burden as a percentage of their annual income. Elderly people and young adults will on the other hand face higher tax burden as a portion of their income, having more difficulties to save larger amounts of income. See also Excise tax FairTax Flat tax Land value tax Pigovian tax Sales tax Sin tax Turnover tax Value-added tax X tax William Petty, early classical economist who proposed a consumption tax The Philosophy of Poverty, by mutualist theorist Pierre-Joseph Proudhon Further reading Ganderson, Joseph; Limberg, Julian (2022), "The Rise of General Consumption Taxes" in Global Taxation. Oxford University Press. Notes External links OECD Center for Tax Policy and Administration The Consumption Tax: Macroeconomic Effects – Edward Cremata Why do consumption taxes encourage saving? Salary After Tax Estimator Income Tax Calculator UK Income Tax Calculator UK Income Tax Calculator Personal taxes