03241oam 22004933a 450 991070292610332120230622022824.0(NBER)w6248(CKB)3240000000022027(OCoLC)55668702(EXLCZ)99324000000002202720230622d1997 fy 0engurcnu||||||||txtrdacontentcrdamediacrrdacarrierSimulating U.S. Tax Reform /David Altig, Alan J. Auerbach, Laurence J. Kotlikoff, Kent A. Smetters, Jan WalliserCambridge, MassNational Bureau of Economic Research1997[Washington, D.C.] :Congressional Budget Office,[1997]1 online resourceillustrations (black and white);NBER working paper seriesno. w6248October 1997.Includes bibliographical references (page 29).This paper uses a new large-scale dynamic simulation model to compare the equity, efficiency, and macroeconomic effects of five alternative to the current U.S. federal income tax. These reforms are a proportional income tax, a proportional consumption tax, a flat tax, a flat tax with transition relief, and a progressive variant of the flat tax called the 'X tax.' The model incorporates intragenerational heterogeneity and kinked budget constraints. It predicts major macroeconomic gains (including an 11 percent increase in long-run output) from replacing the federal tax system with a proportional consumption tax. Future middle- and upper-income classes gain from this policy, but initial older generations are hurt by the policy's implicit capital levy. Poor members of current and future generations also lose. The The flat tax, which adds a standard deduction to the consumption tax, makes all members of future generations better off, but at a cost of halving the economy's long-run output gain and harming initial older generations. Insulating these older generations through transition relief further reduces transition relief further reduces the long-run gains from tax reform. Switching to a proportional income tax without deductions and exemptions hurts current and future low lifetime earners, but helps everyone else. It also raises long-run output by over 5 percent. The X tax makes everyone better off in the long-run and also raises long-run output by 7.5 percent. But it harms initial older generations who bear its implicit wealth tax.Working Paper Series (National Bureau of Economic Research)no. w6248.GeneraljelcComputable General Equilibrium ModelsjelcGeneralComputable General Equilibrium ModelsH20jelcC68jelcAltig David119422Auerbach Alan J115466Kotlikoff Laurence J124852Smetters Kent A1363736Walliser Jan1143280National Bureau of Economic Research.MaCbNBERMaCbNBERBOOK9910702926103321Simulating U.S. Tax Reform3389959UNINA