THE POOR PERFORMANCE of the American economy in recent years has generated considerable interest in the use of tax policy to stimulate economic growth. Opinions regarding the possible effectiveness of tax policy in achieving this objective differ sharply. Some believe that changes in tax rates and in key structural features of the tax system would increase work, saving, and investment and boost the growth of productivity dramatically. Others believe that these claims are exaggerated.
Although public finance economists have always accepted the idea that taxation can have significant effects on incentives, it is only recently that they have turned to making quantitative estimates of these effects. Much of this research has been reported in professional journals not read by the public. Since the issues are important as well as complex, the Brookings Institution convened a conference of experts on October 18-19, 1979, to evaluate competing claims and to arrive at the best quantitative estimates of alternative tax policies.
The papers presented and discussed at the conference were prepared by scholars trained in modern econometric techniques. The areas covered include labor supply, business investment, corporate financial policy, the stock market, capital gains, residential construction, saving, and charitable contributions. Each author was asked to review previous estimates of the effects of tax policy in the particular area assigned to him and to prepare his own estimates on the basis of the most recent data available to him. This volume contains the papers presented at the conference, revised to take into account the comments and suggestions of the conference participants, and the comments of the formal discussants of each