Fundamental tax reform is examined in a heterogeneous overlapping-generations (OLG) model in which agents face idiosyncratic earnings shocks and uncertain life spans. Following Auerbach and Kotlikoff (1987), a Lump-Sum Redistribution Authority is used to rigorously examine efficiency gains over...

This paper formulates and estimates an open-economy overlapping generation general-equilibrium model of endogenous heterogeneous human capital in the form of schooling and on-the-job training. Physical capital accumulation is also analyzed. We use the model to explain rising wage inequality in...

As a tax base, 'consumption' is sometimes argued to be less fair than 'income' because the benefits of not taxing capital income accrue to high-income households. We argue that, despite the common perception that consumption taxation eliminates all taxes on capital income, consumption and income...

Many critics believed that the Tax Reform Act of 1986 (TRA86) would discourage saving. Yet personal saving rates have rebounded since 1987. This rebound might have been caused by a general decline in marginal tax rates on household saving. And we estimate, at least for the 1980s, a positive...

This paper uses the experience after the Tax Reform Act of 1986 to examine how taxes affect three aspects of individual taxpayer behavior: labor supply, total taxable income, and capital gains. The substantial sensitivity of married women's labor supply implies that the efficiency of the tax...

This paper reports new estimates of the sensitivity of taxable income to changes in tax rates based on a comparison of the tax returns of the same individual taxpayers before and after the 1986 tax reform. This comparison is done by using a panel of more than 4000 individual tax returns created...

The tax changes of the 1980s altered the incentives for housing consumption. Marginal tax rate reductions in both the Economic Recovery Tax Act (1981) and the Tax Reform Act (1986) reduced the attraction of homeownership, particularly at high income levels. The Tax Reform Act, by lowering...

The impact of fiscal policy on economic activity is still a matter of great debate. And, ever since Keynes first commented on it, interwar Britain, 1918- 1939, has remained a particularly contentious case | not least because of its high debt environment and turbulent business cycle. This debate...

This paper sketches how the tax reforms of the 1980s affected the incentives and distortions associated with tax policy toward housing markets. There are three principal conclusions. (1) Reductions in marginal tax rates, particularly for high-income households, reduced the tax-induced distortion...

There has been keen interest in recent years in environmentally motivated or 'green' tax reforms. This paper employs analytical and numerical general equilibrium models to investigate the costs of such reforms, concentrating on the question of whether these costs can be eliminated when revenues...