The Regressivity of a Tax on Consumer Interest Exceeding Fifteen Percent

This note estimates the tax incidence of a proposed thirty percent surtax on consumer interest in excess of fifteen percent annually using data from the 2007 Survey of Consumer Finance. The burden of this tax falls on the 11.8% of households with unpaid balances on credit cards with interest rates over fifteen percent. The tax is highly regressive with a Suits Index of -0.40.