Tax scholars have developed a number of theories over the years with respect to a pure (or normative) income tax system. These theories seem to be more important than ever, particularly in light of the current Administration's interest in tax reform. It appears that in developing a pure income tax system, three theories are of particular importance: the Haig-Simons definition of income, Samuelson depreciation, and the Cary Brown model. The Cary Brown model also is important in understanding a pure consumption tax system.

This brief paper discusses the history behind each theory and demonstrates an application of the theory. It should be noted that while it is critical to understand these three theories in establishing a pure income tax system, complying with them may not be feasible or desirable in all cases. Issues of equity, efficiency, and administrability will arise in establishing a pure income tax system. As a result, these issues must be considered in utilizing or implementing the three theories. In addition, nontax goals, as evidenced by the tax expenditure concept, also should be considered.

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