Transition strategies in enacting fundamental tax reform

Resource Information

The work Transition strategies in enacting fundamental tax reform represents a distinct intellectual or artistic creation found in International Bureau of Fiscal Documentation. This resource is a combination of several types including: Work, Language Material, Continuing Resources.

Label

Transition strategies in enacting fundamental tax reform

Creator

• Keuschnigg, C
• Keuschnigg, M

Subject

• business tax
• allowance for corporate equity
• tax reform
• cash flow tax

Language

eng

Summary

This paper discusses transition strategies that might be used in moving from an income tax to consumption based business taxes in the form of an R (real) base cash-flow tax, an R+F (real plus financial) base tax, or an ACE (allowance for corporate equity) tax. While these three taxes have attractive neutrality properties, moving from the status quo to a new system often involves a difficult trade-off between short-run losses and longrun gains. The authors consider two alternative ways of spreading the gains and costs of reform more evenly across generations. Deficit financing of the large revenue loss that occurs immediately after reform allows the smoothing of wage tax rates over time and the elimination or reduction of short-run income losses. Alternatively, a system of delayed deductions requires firms to carry forward with interest some of the large deductions that are newly available after the enactment of a major tax reform. In shifting tax revenue from the future to the present, such policies are politically appealing, as they trade somewhat reduced future income gains for improved economic performance immediately after reform

Citation source

In: National tax journal. - Washington. - Vol. 65 (2012),

Geographic coverage

North America

Language note

English