Growth, Distribution, and Tax Reform: Thoughts on the Romney Proposal

Harvey Rosen
Additional contact information
Harvey Rosen: Princeton University

No 1400, Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: Governor Romney has proposed a personal income tax reform that would lower marginal tax rates and broaden the tax base. Critics of the proposal have argued that high-income taxpayers would receive a tax cut, and given that the proposal is meant to be revenue neutral, this would inevitably lead to increased taxes for families with low and moderate incomes. Because the Romney proposal does not specify in detail just what tax preferences might be eliminated or scaled back in order to broaden the tax base, much of the debate over it has focused on what provisions would be politically and administratively feasible. While this discussion has been illuminating in some respects, something seems to be missing. Relatively little has been said about the possible effects of the Romney proposal on economic growth. This is curious because increasing growth is the motivation for the proposal in the first place. In this paper, I analyze the Romney proposal taking into account the additional income that might be generated by economic growth. The main conclusion is that under plausible assumptions, a proposal along the lines suggested by Governor Romney can both be revenue neutral and keep the net tax burden on high-income individuals about the same. That is, an increase in the tax burden on lower and middle income individuals is not required in order to make the overall plan revenue neutral.

Keywords: tax reform; income tax rates; tax cut; United States; Mitt Romney (search for similar items in EconPapers)
JEL-codes: D19 D31 E62 H20 H21 (search for similar items in EconPapers)
Date: 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://gceps.princeton.edu/wp-content/uploads/2017/01/228rosen.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:228

Access Statistics for this paper

More papers in Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().