A Review of the Second Edition of The Flat Tax by Robert E. Hall and Alvin Rabushka (Hoover Institution Press, pages, $ paperback), and published in. Download Citation on ResearchGate | Flat tax: An overview of the hall-rabushka proposal | The concept of replacing the current U.S. income tax system with a. The Hall-Rabushka flat tax would replace the current income tax system with a consumption tax. Their system is a two-part value-added tax (VAT). All value.

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But these gains are uncertain and depend critically on the details of the reform. The question remains, though, of how large these gains would be. As for simplicity, the flat tax would likely slash compliance costs for many businesses and households.

Flat Tax: An Overview of the Hall-Rabushka Proposal

rabushak The Brookings Institution, The Hall-Rabushka proposal has served as the blueprint for several proposals to reform the federal tax system, including a proposal introduced by Representative Richard Armey R-Texas and Senator Richard Shelby R-Alabama and one offered by presidential candidate Steve Forbes R in the presidential primaries. Second, consumption taxes reallocate after-tax income toward high-saving households. Tax rate Flat Progressive Regressive Proportional.

Proponents typically point to two reasons why consumption taxes should spur saving. But those older households have received transfers rabushkx Social Security and Medicare that far outreach what they have put in. Because these households would benefit most from eliminating the double taxation on future saving under a consumption tax, it is reasonable that they pay for some of the costs. An income tax taxes savings both when the money is earned and again when the savings earn interest.

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About half of private savings already receive consumption tax treatment. Unsourced material may be challenged and removed. Without the personal rax, the flat tax would be equivalent to a VAT, but with taxes on wages remitted by households rather than business.

Tax reform Tax stubs. Third, the estimates apply to a pure, well-designed consumption raushka. November Learn how and when to remove this template message. Surely, the strongest argument for exempting old capital from taxes is fairness.

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You can help Wikipedia by expanding it. The Hall-Rabushka flat tax In the early s, Robert Hall and Alvin Rabushka of the Hoover Institution developed a consumption tax system that achieves some of the administrative advantages of a value-added tax VAT relative to a sales tax, while also partially addressing concerns that consumption taxes impose a relatively heavier tax burden on lower-income taxpayers.

Relatively few elderly households finance much of their living expenses by other assets, and those that do tend to be very well off.

Although estimates vary, a recent study suggests that a pure flat tax proposal with limited personal exemptions would raise economic output by between 2 and 4 percent over the first nine years and between 4 and 6 percent in the long run. Rabuhska using this site, you agree to the Terms of Use and Privacy Policy. Ten years hence, we may find that what started as simplicity has once again become a confused jumble. Without a significant gain in living standards, uprooting the entire tax fkat is rabushhka not worth the risks, redistributions, and adjustment costs it would impose.


Thus, the only difference in principle between a consumption tax and an income tax is the treatment of the savings. These changes would, of course, require higher rates.

Hall–Rabushka flat tax

Hall, Robert, and Alvin E. The answer may not be as obvious as it seems. But a consumption tax treats all saving equally, making it less likely that workers and employers would continue to accept the high regulatory and administrative costs of pensions.

The Hall-Rabushka proposal could be gabushka in several ways. A key element in raising growth and a major motivation for tax reform is increasing saving. Allowing for transition relief alone is enough to reduce the impact on growth to zero in the long run. To the extent that workers did not resave all of their reduced pension contributions, saving would fall.

Allowing exemptions for children reduces the effects by about 2 percentage points e. Copyright of the written materials contained within the Urban Institute website rabuskha owned or controlled by the Urban Institute.

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