Oecd ilibrary tax policy reform and economic growth. How tax reform can address americas diminishing investment and economic growth. At the outset, i should note that the types of reforms i will be discussing will take some time to pass and implement. Cea the growth effects of corporate tax reform and implications for wages 2 foundation imply a longrun gdp boost of 3.
Personal income tax reform strategies 98 notes 99 chapter 6. Yet, in practice, it is hard to completely separate the analysis of the overall tax burden from that of tax structure. Tax system is the combination of the tax policy and tax administration which is the central of the successful implication fiscal policy and the overall management of the public sector. Americas economic problems are often attributed by those in the popular press and in political office to a lack of demand, resulting in numerous policies aimed at boosting consumption. It stresses that with clear vision, strong leadership and solid tax policy analysis, growthoriented tax. Growthoriented tax reform measures include tax base broadening and a reduction in the top marginal personal income tax rates. Tax policy concept statement 1 guiding principles of good. Chapter 5 business tax reform and economic growth t he u. Modeling the economic effects of past tax bills by scott greenberg, john olson, and stephen j. The purpose of the study is to identify the role and impact of tax in economic growth. In discussing tax reform, it is unusual to bring in a discussion of monetary policy.
Chamber senior vice president, economic policy division, and chief economist comprehensive tax reform rests foremost on two pillars. Oecd tax policy studies tax policy reform and economic growth in the wake of the recent financial and economic crisis, many oecd countries face the challenge of restoring public finances while still supporting growth. While the tax foundation typically uses the taxes and growth model to forecast the revenue and economic effects of proposed federal tax changes, the model can also. Tax rate cuts may encourage individuals to work, save, and invest, but if the tax cuts are not financed by. Tax reform and monetary policy are typically viewed as two very different areas of economic policy.
I am grateful for support to princetons griswold center for economic policy studies. Oecd tax policy studies tax policy reform and economic growth. Oecd tax policy studies tax policy reform and economic growth organisation for economic cooperation and development, oecd on. Business tax reform and economic growth whitehouse. Tax reforms in eu member states 2014 european economy 62014 economic and financial affairs tax policy challenges for economic growth and fiscal sustainability issn 17253217 online issn 03790991 print the european economy series contains important reports and communications from the. Investment allocation and growth under the tax reform act of 1986 7. Pdf tax policy for economic recovery and growth researchgate. Implemented tax reforms during and after the crisis 102 6. Thus, the policy solutions for economic recovery and growth in countries around the world should include improving the tax treatment of capital investments and reducing direct taxes on workers. On the individual side, the system should do more to encourage and reward work, increase the accumulation of human capital, and ensure that economic gains are widely shared. Tax policy challenges for economic growth and fiscal sustainability.
Changing the overall structure of taxation to raise more revenue from taxes on consumption and from recurrent taxes on residential property and less from income. On the basis of the introduction of chinas previous main measures in tax reform, this paper uses methods as descriptive statistics, multisegment linear regression model and principal component analysis to analyze how economic growth and tax reform. Wellcrafted tax reform would improve economic growth. Data and research on income taxes including oecd tax databases, taxing wages, revenue statistics, tax policy studies. This cpb policy brief describes why tax reform measures are adopted in. The analysis suggests a tax and economic growth ranking order according to which corporate taxes are the most harmful type of tax for economic. Issn 17253217 online issn 03790991 print tax reforms. To understand how tax policy may change gdp by affecting labor supply, physical capital, human capital, and technological progress, it is useful to think of gdp as being the product of the amount of labor supplied in the economy and the average productivity of that labor. This report identifies those public and political economy tax reform strategies that.
This annual report, prepared by the european commission s directorate general for economic and financial affairs and the directorate general for taxation and customs union, aims to make a contribution to discussions on tax policy in the eu through an analysis of tax policy challenges and recent reforms in the eu member states. The focus of my remarks is on the role of business tax reform in promoting economic growth. In examining these directions, governments will need to take account of other fac. Recommended growthoriented tax reform measures include taxbase broadening and a reduction in the top marginal personal income tax rates. Given that it takes nearly 40p in tax for every pound generated in the economy, an obvious place to look is the structure of the tax system. The tax and growth recommendations are unchanged 103 references 105 annex a. Broad overviews of how tax policy influences important issues, including the environment, education, and inequality.
This report identifies those public and political economy tax reform strategies that will allow policy makers to reconcile differing tax policy objectives and overcome obstacles to reform. Tax reform for growth, equity, and revenue tax policy center. Part i of this document discusses four principal determinants of economic growth that tax. The details of president trumps reform have not been very specific in nature, but are focused on adjusting the individual tax bracket from. Jorgenson, harvard university and kunyoung yun, yonsei university april 2, 2012 acknowledgements. Without it youre not going to gain very much from tax reform, jorgenson says. The tax policy changes that are most likely to increase growth in any particular country will depend on its starting point, in terms of both its current tax system and the areas such as employment, investment or productivity growth in which its current. Oecd ilibrary obstacles to fundamental tax reforms. Although texas is the 2nd largest state economy, over the past 10 years its economic growth rate has significantly. Taxing immovable property revenue potential and implementation challenges prepared by john norregaard1 authorized for distribution by victoria perry and michael keen may 20 abstract the tax on immovable property has been characterized as probably the most unpopular among tax instruments, in part because it is salient and hard to avoid. This paper aims to study the mechanism of how economic growth and tax reform affect total tax revenue and structure over the period 19502011. Pdf the impact of economic growth and tax reform on tax.
Enhancing texas economic growth through tax reform 4 texas public policy foundation enhancing texas economic growth potential through tax reform states tend to be large or fast growing, but not both. How balancing tax policy and growth remains a challenge. When taking this amount, inefficiencies in design clearly. Progrowth tax strategy goes beyond national borders as.
Countries should take this opportunity to restructure their revenue base to rely more on taxes that are less harmful to investment and growth and put. The impact of economic growth and tax reform on tax. If, however, one of the goals of tax reform is greater economic growth, then a. This paper examines how changes to the individual income tax affect longterm economic growth. The biggest individual and business tax cut in american history goals for tax reform grow the economy and create millions of jobs simplify our burdensome tax code provide tax relief to american familiesespecially middleincome families. This section also includes otherreports by the department of the treasury that were written in conjunction with office of tax policy staff. Morris university professor in harvard universitys department of economics and pioneer of several aspects of modern economic analysis of tax policy. This document,1 prepared by the staff of the joint committee on taxation, includes an overview of economic growth and the effect that taxes may have on economic growth. This report investigates how tax structures can best be. Progrowth reforms will also help mitigate high debt and growing deficits by getting the economy growing at. The structure and financing of a tax change are critical to achieving economic growth.
A framework for evaluating tax proposals overview purpose of this tax policy concept statement discussions occur regularly among politicians, economists, tax practitioners and others about changing national and subnational tax systems. Oecd tax policy studies tax policy reform and economic. Growthoriented tax policy reform recommendations oecd. Investment incentives under the tax reform act of 1986 6. Taxation, efficiency, and economic growth by dale w. Enhances understanding of the role taxes play in society. This document,1 prepared by the staff of the joint committee on taxation, includes an overview of economic growth and the impact that taxes may have on economic growth. Tax policy and economic growth 75 investment and productivity growth rates two to three times those of the united states.
In the recent tax debate, a number of lawmakers and advocates have made a seemingly more modest claim that tax cuts and reform can accelerate the economic growth rate by 0. Tax policy reform and economic growth in the wake of the recent financial and economic crisis, many oecd countries face the challenge of restoring public finances while still supporting growth. This paper was prepared for the handbook of computable general equilibrium modeling, edited by peter b. To motivate this topic, i will start with a brief discussion of economic growth before getting to business tax reform specifically. Pdf the impact of tax reforms and economic growth of nigeria. Pdf on jan 1, 20, kanghua zeng and others published the impact of economic. On the whole, the ultimate goal of tax reform is the enhancement of public revenue generation.
Equitable growth supports research and policy analysis on how trends in economic inequality and mobility and changes in the economy have affected the concentration of wealth, income, and earnings, and how these distributional shifts have affected the promise of economic security and opportunity. Modeling the economic effects of past tax bills fact. Transforming tax policy reform into economy growth and the role of. Several studies pertaining to tax reforms in nigeria have tied tax reform on economic growth undermining public generated revenue. Part i of this document discusses four principal determinants of economic growth that tax policy may be able to influence.
Family economic income and other income concepts used in analyzing tax reform 4. An assessment of tax policy reform and revenue growth in liberia. In this paper, we reexamine the relationship between economic growth and taxation in light of the accumulated economic evidence, both from the united states and other countries. Tabulations from the treasury tax reform data base 5. Taxation, economic growth and sustainable tax revenues 101 6. Oecd 2010, tax policy reform and economic growth, oecd publishing. Income taxes, economic growth, tax cuts, tax reform. But implementing progrowth tax reforms may not be easy. This report investigates how tax structures can best be designed to support gdp per capita growth. In order to simplify and reform the existing income tax, but. None of the variants in eca is a flat tax in its most theoretical shape, however. The office of tax policy produces reports to promote the understanding of the us internal revenue code and specific tax proposals.