Haig-Simons equation
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The Haig-Simons equation was developed by American economists Robert M. Haig and Henry C. Simons in the 1920s and 1930s. It defines economic income as
- C + ΔW
where C = consumption and ΔW = change in wealth.
Here, broadly speaking, consumption refers to the purchase or acquisition of goods and services of any kind. From a perfect theory view, consumption does not include capital expenditures and the full spending would be amortized.
The Haig-Simon equation is different from the U.S.'s tax base calculations. For example, any employer contributions to employee health insurance are not included in taxable employee income. Under the Haig-Simons definition of income, it would be included.[1]
[edit] References
- ^ Gruber, Jonathan: "Public Finance and Public Policy", page 499. Worth Publishers,2005
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