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American Economic Review: Vol. 91 No. 3 (June 2001)
AER Volume. 91, Issue 3 | 
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Simulating Fundamental Tax Reform in the United States
Article Citation
Altig, David. 2001. "Simulating Fundamental Tax Reform in the United States."
American Economic Review,
91(3): 574-595.
DOI: 10.1257/aer.91.3.574
DOI: 10.1257/aer.91.3.574
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.
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Authors
Altig, David (Federal Reserve Bank of Cleveland)
JEL Classifications
E62: Fiscal Policy
H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
H30: Fiscal Policies and Behavior of Economic Agents: General
H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
H30: Fiscal Policies and Behavior of Economic Agents: General
