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The Impact on Efficiency and Distribution of a Base-Broadening and Rate-Reducing Tax Reform

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  • Johan Willner
  • Lena Granqvist

Abstract

We analyze a base-broadening, rate-reducing, and simplifying tax reform, which may be revenue-neutral, or which may keep the average tax rates constant. Such a reform generally improves efficiency under reasonable conditions but not necessarily if the average tax rate is calculated on taxable incomes or if revenue-neutrality refers to aggregate tax payments only. In most cases, an efficiency-improving reform probably increases inequality unless the marginal rate reduction greatly affects low-income taxpayers. So in some cases, there might be a utilitarian case for increasing, rather than reducing the marginal tax rate. Copyright Kluwer Academic Publishers 2002

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  • Johan Willner & Lena Granqvist, 2002. "The Impact on Efficiency and Distribution of a Base-Broadening and Rate-Reducing Tax Reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(3), pages 273-294, May.
    • Handle: RePEc:kap:itaxpf:v:9:y:2002:i:3:p:273-294
    DOI: 10.1023/A:1016284731519
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    Cited by:

    1. Estian Calitz, 2019. "Are the South African fiscal authorities serious about tax base broadening?," Working Papers 06/2019, Stellenbosch University, Department of Economics.
    2. Blaufus, Kay & Bob, Jonathan & Hundsdoerfer, Jochen & Kiesewetter, Dirk & Weimann, Joachim, 2013. "Decision heuristics and tax perception – An analysis of a tax-cut-cum-base-broadening policy," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 1-16.
    3. Blaufus, Kay & Bob, Jonathan & Hundsdoerfer, Jochen & Kiesewetter, Dirk & Weimann, Joachim, 2010. "It's all about tax rates: An empirical study of tax perception," arqus Discussion Papers in Quantitative Tax Research 106, arqus - Arbeitskreis Quantitative Steuerlehre.

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