Edith Cowan University
Place of Publication
Joondalup, Western Australia
Faculty of Business and Public Management
School of Accounting, Finance and Economics
OECD tax revenue statistics show that on average the share of consumption tax is almost equal to that of income tax. However, consumption tax hardly attracts any attention from intermediate macroeconomic textbooks, not to mention its inclusion in IS-LM model. This paper compares the IS curves under an income tax regime and a general consumption tax regime. It also examines the trade off between the income tax rate and the consumption tax rate in a dual tax regime.