[clarification needed] The measure of the income tax base equal to the sum of consumption and change in net worth was first advocated by German legal scholar Georg von Schanz.
[4][5] Haig defined personal income as "the money value of the net accretion to one's economic power between two points of time," a formulation that was intended to include the taxpayer's consumption.
[6] That was thought by Simons to be interchangeable with his own formulation: In this concept, all inflows and outflows of resources are considered taxable income in a broad sense, including donations and windfall gains.
[11] By contrast, the base for a theoretically correct Schanz–Haig–Simons (SHS) income tax is each individual's annual consumption plus current additions to savings.
In the European Union, a value added tax applies to purchases of goods and services on each level of exchange until it reaches the ultimate consumer.
[20] Indeed, Simons rejected both the notion that humans are "equally efficient pleasure machines,"[21] and the idea that taxation can take account of interpersonal utilities.