The economic effects of the fair tax: analysis of results of a dynamic CGE model of the US economy

Bhattarai, Keshab.; Haughton, Jonathan.; Tuerck, David G..

doi:10.1007/s10368-016-0352-4

Authors

Dr Keshab Bhattarai K.R.Bhattarai@hull.ac.uk
Senior Lecturer in Economics

Jonathan Haughton

David G. Tuerck

Abstract

By replacing the current income tax with a national sales tax, the FairTax proposal would end the double taxation of saving inherent in the existing tax code and, by doing so, raise output, employment, investment and capital stock relative to the benchmark economy. While these positive effects would be felt almost immediately, the FairTax is very much an investment in the future. Its full benefits would be realized only after the economy achieved a new “steady state,” some 20–25 years into implementation. Only by that point, will the effects on growth have been fully absorbed into the economy and the wellbeing of most households across most income groups improved. The policy choice, then, is between the status quo, and a new policy that would inflict some short-run pain as the price of a permanently expanded economy.

Journal Article Type	Article
Publication Date	2016-07
Journal	International economics and economic policy
Print ISSN	1612-4804
Electronic ISSN	1612-4812
Publisher	Springer Verlag
Peer Reviewed	Peer Reviewed
Volume	13
Issue	3
Pages	451-466
Institution Citation	Bhattarai, K., Haughton, J., & Tuerck, D. G. (2016). The economic effects of the fair tax: analysis of results of a dynamic CGE model of the US economy. International economics and economic policy : IEEP, 13(3), (451-466). doi:10.1007/s10368-016-0352-4. ISSN 1612-4804
DOI	https://doi.org/10.1007/s10368-016-0352-4
Keywords	Dynamic CGE; Tax reform; Growth; Distribution; US economy
Publisher URL	http://link.springer.com/article/10.1007/s10368-016-0352-4
Copyright Statement	© The Author(s) 2016. Open Access. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Additional Information	Copy of article first published in: International economics and economic policy, 2016, v.13 issue 3.

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Copyright Statement
© The Author(s) 2016. Open Access. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.