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Estimating Flat Tax Incidence and Yield: A Sensitivity Analysis

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  • Dunbar, Amy
  • Pogue, Thomas F.

Abstract

This research estimates the distributional effects of replacing existing federal income taxes with a flat tax as proposed by Representative Richard Armey and Senator Richard Shelby. Different assumptions about tax incidence and how the flat tax would be implemented yield somewhat different estimates of the distribution of gains and losses. Nevertheless, our main conclusions appear to be quite robust. Switching to the proposed flat tax would increase the tax burdens of a majority of taxpayers and would significantly redistribute tax burdens, mainly from the top decile to other taxpayers. This pattern of redistribution persists, although the top decile’s gains are lessened, even if the flat tax is modified to make it more progressive.

Suggested Citation

  • Dunbar, Amy & Pogue, Thomas F., 1998. "Estimating Flat Tax Incidence and Yield: A Sensitivity Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(2), pages 303-324, June.
    • Handle: RePEc:ntj:journl:v:51:y:1998:i:2:p:303-24
    DOI: 10.1086/NTJ41789328
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    References listed on IDEAS

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    1. James M. Poterba (ed.), 1997. "Tax Policy and the Economy, Volume 11," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661047, April.
    2. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
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    Citations

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    Cited by:

    1. Clemens Fuest & Andreas Peichl & Thilo Schaefer, 2008. "Is a flat tax reform feasible in a grown-up democracy of Western Europe? A simulation study for Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(5), pages 620-636, October.
    2. Paulus, Alari & Peichl, Andreas, 2008. "Effects of flat tax reforms in Western Europe on equity and efficiency," ISER Working Paper Series 2008-06, Institute for Social and Economic Research.
    3. Sergio Galletta & Agustin Redonda, 2017. "Corporate flat tax reforms and businesses’ investment decisions: evidence from Switzerland," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 962-996, December.
    4. repec:kap:iaecre:v:14:y:2008:i:4:p:460-471 is not listed on IDEAS
    5. Schaefer, Thilo & Peichl, Andreas & Fuest, Clemens, 2007. "Is a Flat Tax politically feasible in a grown-up Welfare State?," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 07-6, University of Cologne, FiFo Institute for Public Economics.
    6. Andreas Peichl, 2009. "The Benefits and Problems of Linking Micro and Macro Models — Evidence from a Flat Tax Analysis," Journal of Applied Economics, Taylor & Francis Journals, vol. 12(2), pages 301-329, November.
    7. Andreas PEICHL, 2008. "The Benefits of Linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," EcoMod2008 23800106, EcoMod.
    8. Fuest, Clemens & Peichl, Andreas & Schaefer, Thilo, 2007. "Is a Flat Tax Feasible in a Grown-up Welfare State?," IZA Discussion Papers 3142, Institute of Labor Economics (IZA).
    9. Cristián Mardones P., 2014. "Complementarity between flat tax and conditional cash transfers to improve the income distribution in Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 17(3), pages 04-27, December.
    10. Paul Bachman & Jonathan Haughton & Laurence J. Kotlikoff & Alfonso Sanchez-Penalver & David G. Tuerck, 2006. "Taxing Sales Under the FairTax: What Rate Works?," NBER Working Papers 12732, National Bureau of Economic Research, Inc.
    11. Deena Skipper & Hughlene Burton, 2008. "Ramifications of a Flat Tax—Shifting the Burden to the Middle Class," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 14(4), pages 460-471, November.
    12. Calegari, Michael, 1998. "Flat Taxes and Effective Tax Planning," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(4), pages 689-713, December.

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