The Tax Reform Act of 1986: Comment on the 25th Anniversary

DSpace/Manakin Repository

The Tax Reform Act of 1986: Comment on the 25th Anniversary

Citable link to this page

. . . . . .

Title: The Tax Reform Act of 1986: Comment on the 25th Anniversary
Author: Feldstein, Martin S.
Citation: Feldstein, Martin S. 2011. The Tax Reform Act of 1986: Comment on the 25th Anniversary. Working Paper 17531, National Bureau of Economic Research.
Full Text & Related Files:
Abstract: The Tax Reform Act of 1986 was a powerful pro-growth force for the American economy. Equally important, as we look back on it after 25 years, we also see that it taught us two important lessons. First, it showed that politicians with very different political philosophies on the right and on the left could agree on a major program of tax rate reduction and tax reform. Second, it showed that the amount of taxable income is very sensitive to marginal tax rates. More specifically, the evidence based on the 1986 tax rate reductions shows that the response of taxpayers to reductions in marginal tax rates offsets a substantial portion of the revenue that would otherwise be lost. This implies that combining a broadening of the tax base that raises revenue equal to 10 percent of existing personal income tax revenue with a 10 percent across the board cut in all marginal tax rates would raise revenue equal to about four percent of existing tax revenue. With personal income tax revenue in 2011 of about $1 trillion, that four percent increase in net revenue would be $40 billion at the current level of taxable income or more than $500 billion over the next ten years.
Published Version: http://www.nber.org/papers/w17531
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:8747960

Show full Dublin Core record

This item appears in the following Collection(s)

  • FAS Scholarly Articles [6902]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

Search DASH


Advanced Search
 
 

Submitters