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213 IRET Congressional Advisory 1 (2006)

handle is hein.taxfoundation/iretcgadv0210 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies thait will promote growth and efficient operation of the market economy. November 10, 2006 Advisory No. 213 HOW MUCH GROWTH FROM TAX REFORM? PRESIDENT'S ADVISORY PANEL ON FEDERAL TAX REFORM: PART THREE The Report of the President's Advisory Panel on Federal Tax Reform provided estimates by the Treasury Department of the additional growth of national income that would result from three alternative tax systems: the Simplified Income Tax Plan (SIT), the Growth and Investment Tax Plan (GIT), and the Progressive Consumption Tax Plan (PCT). The growth estimates were offered as an indication of the amount of economic benefit that the plans would achieve for the population. The Report also estimated ranges for the potential additional growth of the capital stock under each plan. However, the Panel ignored the additional growth when it calculated the tax rates needed to achieve revenue neutrality. The reform plans would add to the National Income (or GDP) largely by encouraging additional capital investment. They would do so by eliminating some of the tax biases against saving and investment in the current tax system, reducing marginal tax rates on capital income, while leaving marginal tax rates Maximum Added National Income (Total GDP) Predicted by Treasury for President's Tax Panel Proposals Plan 10th year 20th year Long run Simplified Income Tax Plan 0.5% 1.0% 1.2% Growth and Income Tax Plan 1.8% 3.6% 4.7% Progressive Consumption Tax Plan 2.3% 4.5% 6.0% Report of the President's Advisory Panel on Federal Tax Reform, pages 149 and 190. Ranges of Increases in Capital Stock Predicted by Treasury for President's Tax Panel Proposals Plan 10th year 20th year Long run Simplified Income Tax Plan 0.1% - 0.4% 0.3% - 1.4% 1.4% - 2.3% Growth and Income Tax Plan 0.5% - 3.64% 1.7% - 11.7% 5.3% - 19.8% Progressive Consumption Tax Plan 0.7% - 5.1% 2.5% - 16.7% 7.6% - 27.9% Report of the President's Advisory Panel on Federal Tax Reform, pages 149 and 190. IFm k .* * g g

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