Tax policy and resource allocation
Abstract
In order to explore the directions for future tax reform for the United States, we analyze the efficiency costs of taxation for various parts of the tax system and estimate the potential welfare gains from tax reform proposals. We employ the dynamic general equilibrium model that Dale Jorgenson and I developed. To estimate efficiency costs of taxation, we replace parts of the US tax system with hypothetical lump-sum tax and measure the welfare loss due to the taxes replaced by the lump-sum tax. To evaluate the welfare gains from tax reform proposals, we compare the growth paths of the economy under the alternative ...
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