Fantastic tax cuts and where to find them

Felix Bierbrauer, Pierre Boyer and Emanuel Hansen

No 51, ECONtribute Policy Brief Series from University of Bonn and University of Cologne, Germany

Abstract: An important question in public economics is whether, and under what conditions, it may be possible to design a self-financing tax cut. This column provides new theoretical insights on the requirements for a tax reform that makes everyone better off. Furthermore, it shows that if there is no self-financing tax cut with changes to one or two income brackets, then a more complicated reform will also not work. It applies these insights to the US Earned Income Tax Credit reform in 1975. Although this reform had the correct properties, the analysis concludes that it was not fully self-financing.

Pages: 8
Date: 2023-08
New Economics Papers: this item is included in nep-pbe and nep-pub
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https://www.econtribute.de/RePEc/ajk/ajkpbs/ECONtribute_PB_051_2023.pdf First version, 2023 (application/pdf)

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