Journal Article

Taxation, growth, and welfare: a framework for analysis and some preliminary results

Abstract: Reform of the U.S. tax system has become the focus of much political discourse in recent years. Proposals have called for many types of change-from the relatively modest, like more favorable treatment of capital gains or tax credits for college education, to more radical plans to introduce a flat tax and \"end the IRS as we know it.\" The benefits of such proposals, advocates claim, range from a more efficient, less burdensome tax collection process to higher long-run growth. ; In this article, Mark Wynne provides a framework for analyzing the validity of some of these claims. He begins with a look at how U.S. tax rates on capital, labor, and consumption compare with similar tax rates of other major industrialized countries. Wynne then develops a framework for analyzing how some potential tax reforms might affect the economy's long-run growth rate. He uses a series of simple tax reform experiments to illustrate a basic principle of efficient taxation: that a shift toward heavier taxation of consumption would be beneficial.

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Economic and Financial Policy Review

Publication Date: 1997

Issue: Q I

Pages: 2-13