Economic Effects of Fundamental Tax Reform

Economic Effects of Fundamental Tax Reform

Economic Effects of Fundamental Tax Reform

Economic Effects of Fundamental Tax Reform


#Papers presented at a conference sponsored by the Brookings Institution.#Includes bibliographical references and index.


Tax reform has returned to the national political agenda. Ten years ago the issue was how to reform the personal and corporation income taxes. Today the question is whether to replace the income tax with one form or another of consumption taxation. Putting the issue this way is a bit misleading, because the current tax system is a complex hybrid between an income and consumption tax, with some features that violate the principles of either system.

Much public debate on tax reform focuses on broad principles and takes place at a high level of generality. the tax system, however, comprises the most specific of laws with special provisions formulated to achieve a host of narrowly defined objectives. Reform of the current system will therefore have myriad effects. To judge the desirability of reform proposals, one must evaluate the consequences of change not only for the economy as a whole but for the individuals and businesses on whom current tax law has such an important bearing.

On February 15 and 16, 1996, the Brookings Institution convened a conference to examine in detail the effects of the major tax reform proposals currently under discussion. Conference participants listened to twelve papers and the responses of twelve discussants who addressed the probable effects of tax reform on economic growth, saving, labor supply, health insurance, housing, charitable giving, financial institutions, international trade, administrative costs, income distribution (instantaneous and long term), and the special problems of transition. This volume presents those papers and the discussants' comments, along with an introductory chapter by the editors, senior fellows Henry J. Aaron and William G. Gale.

These papers show that fundamental tax reform presents the American public with fundamental choices. the current system is extraordinarily . . .

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