A Review of the Second Edition of The Flat Tax by Robert E. Hall and Alvin Rabushka (Hoover Institution Press, pages, $ paperback), and published in. Download Citation on ResearchGate | Flat tax: An overview of the hall-rabushka proposal | The concept of replacing the current U.S. income tax system with a. The Hall-Rabushka flat tax would replace the current income tax system with a consumption tax. Their system is a two-part value-added tax (VAT). All value.
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The question remains, though, of how large these gains would be. The Hall-Rabushka flat tax In the early s, Robert Hall and Alvin Rabushka of the Hoover Institution developed a consumption tax system that achieves some of the administrative advantages of a value-added tax VAT relative to a sales tax, while also partially addressing concerns that consumption taxes impose a relatively heavier tax burden on lower-income taxpayers.
Economic Effects of Fundamental Tax Reform. Altig, David, et al. As a result, if a flat tax were to raise as much revenue as the current one, the tax burden for the middle class would have to rise. But a tax system with these features might be able to retain the progressivity of the current tax system while also reaping most of the gains of the Hall-Rabushka proposal’s broader base, generally lower flst, and simplified compliance.
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Hoover Institution Press,p. A key element in raising growth and a major motivation for tax reform is increasing saving. A central issue in tax reform is always who wins and who loses. Brookings Institution Press, Because future consumption can be financed only from future wages or existing assets, a consumption tax is a tax on future wages and existing assets.
The effects of a consumption tax on international economic transactions and on the financial sector are potentially far-reaching and need to be examined carefully. Joel Slemrod Gabriel Zucman. Once in place, though, they would be subject to the same compromises and pressures as the income tax is. Ten years hence, we may find that what started as simplicity has once again become a confused jumble.
But for many, the tax system is not that complicated. Effects on businesses and investment would be complicated. Perceptions of fairness may also be difficult to retain when, under tas flat tax, some wealthy individuals and large corporations remit no taxes tsx the government while middle-class workers pay a combined marginal tax rate above 30 percent on the flat tax, state income tax, and payroll fpat. Views Read Edit View history. Not having a transition is also more efficient.
But a consumption tax treats all saving equally, making it less likely that workers and employers would continue to accept the high regulatory and administrative costs of pensions.
Review of Hall & Rabushka
An aspect of fiscal policy. But at the high end of the income distribution, the tax is regressive, just like sales taxes and VATs. First, many of the gains are also available through judicious reform halk the income tax, in particular by making the taxation of capital income more uniform.
Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute. Saving is likely to rise only a little, if at all, for several reasons.
But those older households have received transfers through Social Security and Medicare that far outreach what they have put in. Because these households would benefit most from eliminating the double taxation on future saving under a consumption tax, it is reasonable that they pay for some of the costs. Efficiency gains might arise from five sources: First, a onetime implicit tax on existing capital is very progressive. At least some of the gains could ravushka made simply by modifying the existing system.
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PDF Print this page Share: Under an income tax, pensions are a tax-preferred form of saving. Relatively few elderly households finance much of their living expenses by other assets, and those that do tend to be very well off. The distribution of such capital is more skewed toward wealthy households than is the distribution of overall wealth, which in turn is more skewed than the distribution of income. Although this difference appears simple, consumption taxes come in many rabushla.
Hall–Rabushka flat tax – Wikipedia
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A consumption tax taxes saving only once: Even if a consumption tax is the right system for an economy starting from scratch, it may not be the right way to reform an existing system. The views expressed are those of the authors dlat should not be attributed to the Urban Institute, its trustees, or its funders.