FLAT TAX REFORMS IN THE U.S.: A BOON FOR THE INCOME POOR

Javier Díaz-Giménez () and Josep Pijoan-Mas ()

Working Papers from CEMFI

Abstract: In this article we queantify the aggregate, distributional and welfare consequences of two revenue neutral flat-tax reforms using a model economy that replicates the U.S. distributions of earnings, income and wealth in very much detail. We find that the less progressive reform brings about a 2.4 percent increase in steady-state output and a more unequal distribution of after-tax income. In contrast, the more progressive reform brings about a -2.6 percent reduction is steady-state output and a distribution of aftertax income that is more egalitarian. We also find that in the less progressive flat-tax economy aggregate welfare falls by -0.17 percent of consumption, and in the more progessive flat-tax economy it increases by 0.45 percent of consumption. In both flat-tax refoms the income poor pay less income taxes and obtain sizeable welfare gains.

Keywords: Flat-tax reforms; efficiency; inequality; earnings distribution; income distributions; wealth distribution. (search for similar items in EconPapers)
JEL-codes: D31 E62 H23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-dge, nep-mac, nep-pbe and nep-pub
Date: 2006-07
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Related works:
Working Paper: Flat Tax Reforms in the US: A Boon for the Income Poor (2006)
Working Paper: Flat Tax Reforms in the U.S.: a Boon for the Income Poor (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:cmf:wpaper:wp2006_0611

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