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Is Revenue-Neutral Tax Reform Revenue Neutral?

Author

Listed:
  • Randall G. Holcombe

    (Florida State University)

  • Jeffrey A. Mills

    (Florida State University)

Abstract

When political factors are taken into account, tax reform intended to be revenue neutral is likely to increase tax revenues. Any reduction in the excess burden of the tax system is likely to increase government revenues because the marginal political cost of tax increases is reduced. Evidence from the 1986 tax reform in the United States and the adoption of the value-added tax in many European countries, where the reforms were claimed to be revenue neutral, is consistent with the hypothesis that "revenue neutral" tax reform generates more government revenue.

Suggested Citation

  • Randall G. Holcombe & Jeffrey A. Mills, 1994. "Is Revenue-Neutral Tax Reform Revenue Neutral?," Public Finance Review, , vol. 22(1), pages 65-85, January.
    • Handle: RePEc:sae:pubfin:v:22:y:1994:i:1:p:65-85
    DOI: 10.1177/109114219402200104
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    References listed on IDEAS

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