Simulating Fundamental Tax Reform in the United States

David Altig; Alan J. Auerbach; Laurence J. Kotlikoff; Kent A. Smetters; Jan Walliser

doi:10.1257/aer.91.3.574

American Economic Review Vol. 91 No. 3 2001

Simulating Fundamental Tax Reform in the United States

David Altig¹; Alan J. Auerbach²; Laurence J. Kotlikoff³; Kent A. Smetters⁴; Jan Walliser⁵

¹ Federal Reserve Bank of Cleveland, Cleveland, OH 44101. · ² Department of Economics, University of California, Berkeley, CA 94720. · ³ Department of Economics, Boston University, 270 Bay State Road, Boston, MA 02215. · ⁴ The Wharton School, University of Pennsylvania, 3641 Locust Walk, Philadelphia, PA 19104. · ⁵ International Monetary Fund, 700 19th St. NW, Washington, DC 20431.

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.

DOI: 10.1257/aer.91.3.574
Volume: 91
Issue: 3
Pages: 574-595
Language: en
Sources: crossref bibtex:phds-export.bib openalex

Simulating Fundamental Tax Reform in the United States

Abstract

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