Tax Reform and U.S. Economic Growth
- 1 October 1990
- journal article
- Published by University of Chicago Press in Journal of Political Economy
- Vol. 98 (5, Part 2) , S151-S193
- https://doi.org/10.1086/261728
Abstract
In this paper we evaluate the impact of the Tax Reform Act of 1986 on U.S. economic growth. We first calculate effective tax rates on income from capital employed in corporate, noncorporate, and household sectors. We then project the future growth of the U.S. economy with and without the 1986 tax reform. We find that much of the potential gain in welfare was dissipated through failure to index the income tax base for inflation. The most promising avenue for future reform is to include income from household assets in the tax base, while reducing tax rates on business income.Keywords
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