The Role of Administrative Issues in Tax Reform: Simplicity, Compliance, and Administration

Abstract

Zodrow for helpful comments. We thank Henry Aaron and Samara Potter for extraordinarily helpful comments on the penultimate draft of this paper. We also thank Jim Sly for research assistance. Views and opinions expressed in this paper are those of the authors and do not necessarily represent the policies or positions of the Treasury Department or the staff, officers, or trustees of the Brookings Institution.

Prospects for Consumption-Based Tax Reform in the United States

“…In addition, several authors have noted that many of the simplicity gains that could be attained under a consumption tax, especially the Flat Tax or the NRST, could be attained as well under a simplified income tax -if the political interest and will exist to make such simplifications (Slemrod, 1996, Gale andHoltzblatt, 2002). Examples include eliminating tax preferences under both the corporate and individual income taxes, and collapsing the current progressive rate structure into a single rate, eliminating most or all deductions, exemptions and tax credits, and taxing capital gains uniformly under the individual income tax.…”

“…The various consumption tax plans also raise some potentially troublesome new complexity problems (Gale and Holtzblatt, 2002). For example, a NRST would clearly simplify the tax system in that individuals would no longer have to file returns (except in their roles as business owners).…”

“…A realistic NRST would most likely include some exempt or low-rate goods; such distinctions greatly complicate administration. Alternatively, a demogrant -which could be universal or means tested -would also add complexity, and would lead to significant marriage penalties if it were based on poverty guidelines that depend on family size (Gale and Holtzblatt, 2002). In addition, several sectors of the economy are notoriously difficult to tax under indirect taxes, including housing, health and education, financial services and government expenditures (Cnossen, 2002).…”

“…Of course, it is unclear whether a realistic Flat Tax would retain its purity, or whether it might ultimately be characterized by a variety of tax preferences, each of which would add to the complexity of the tax. At the same time, it would also create new problems (Gale and Holtzblatt, 2002;Feld, 1995). One potentially important issue arises because interest income would be untaxed and interest expense not deductible under the Flat Tax.…”

Analysis of alternative personal income tax models - effects of application in Serbia

“…Iako istraţivanja ne daju eksplicitan odgovor na ovo pitanje, moguće je izvući nekoliko relevantnih zaključaka. 79 Bitan problem povezan sa pitanjem povećanja automatskog stabilizirajućeg dejstva poreskog sistema kroz povećanje njegove progresivnosti i/ili visine poreza ogleda se u negativnom dejstvu takve politike na dugoročnu stopu privrednog rasta. Iako se na taj način smanjuju varijacije u kretanju privredne aktivnosti, zbog negativnih uticaja visokih i progresivnih poreza na efikasnost (ponudu i traţnju faktora proizvodnje), to moţe da dovede do smanjenja dugoročne stope rasta BDP.…”