University of Hull logo

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.

Authors

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.

Files

Article (1.1 Mb)
PDF

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.




You might also like


Downloadable Citations