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Are income taxes destined to rise? the fiscal imbalance and future tax policy

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  • Jason L. Saving
  • Alan D. Viard

Abstract

We present a model of optimizing government behavior in which a need for increased revenue leads to the introduction of a new revenue source, such as a VAT, accompanied by a reduction in income taxes. We argue that this is a plausible outcome for the United States, in view of international experience and recent fiscal reform proposals, and has important implications for individual investment decisions.

Suggested Citation

  • Jason L. Saving & Alan D. Viard, 2015. "Are income taxes destined to rise? the fiscal imbalance and future tax policy," Working Papers 1502, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:1502
    DOI: 10.24149/wp1502
    Note: Published as: Saving, Jason L. and Alan Viard (2015), "Are Income Taxes Destined to Rise? Fiscal Imbalance and Future Tax Policy in the United States," National Tax Journal 68 (2): 235-250.
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    References listed on IDEAS

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    1. Keen, Michael & Lockwood, Ben, 2010. "The value added tax: Its causes and consequences," Journal of Development Economics, Elsevier, vol. 92(2), pages 138-151, July.
    2. Congressional Budget Office, 2014. "The 2014 Long-Term Budget Outlook," Reports 45471, Congressional Budget Office.
    3. Congressional Budget Office, 2014. "The 2014 Long-Term Budget Outlook," Reports 45471, Congressional Budget Office.
    4. Glenn Jenkins & Rup Khadka, 1998. "Value Added Tax Policy And Implementation In Singapore," Development Discussion Papers 1998-02, JDI Executive Programs.
    5. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-178, Winter.
    6. Sijbren Cnossen, 1998. "Global Trends and Issues in Value Added Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 399-428, July.
    7. Vahram Stepanyan, 2003. "Reforming Tax Systems: Experience of the Baltics, Russia, and Other Countries of the Former Soviet Union," IMF Working Papers 2003/173, International Monetary Fund.
    8. James, Simon & Alley, Clinton, 2008. "Successful tax reform: the experience of value added tax in the United Kingdom and goods and services tax in New Zealand," MPRA Paper 19858, University Library of Munich, Germany.
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    More about this item

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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