Simulating Fundamental Tax Reform in the United States
David Altig, Alan J. Auerbach, Laurence J. Koltikoff, Kent A. Smetters, Jan Walliser
American Economic Review · 2001 · Volume 91 · Issue 3
Abstract
This paper uses a new, large-scale, dynamic life-cycle simulation model to compare the welfare and macroeconomic effects of transitions to five fundamental alternatives to the U.S. federal income tax, including a proportional consumption tax and a flat tax. The model incorporates intragenerational heterogeneity and a detailed specification of alternative tax systems. Simulation results project significant long-run increases in output for some reforms. For other reforms, namely those that seek to insulate the poor and initial older generations from adverse welfare changes, long-run output gains are modest.
Keywords
Fiscal Policy, Personal Income and Other Nonbusiness Taxes and Subsidies, includes inheritance and gift taxes, Fiscal Policies and Behavior of Economic Agents: General
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