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Inputs to Tax Policymaking: The Supply Side, the Deficit, and the Level Playing Field

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  • Don Fullerton

Abstract

Although supply side theory may have been obvious to economists, it instigated a major change in the nature of tax policymaking through marginal rate cuts in both the Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986. Also, the 1981 bill was the culmination of an era in which policymakers could use expected revenue increases to enact rate cuts as well as special tax provisions. The deficit became a force in tax policymaking not only because of revenue losses from the 1981 bill, but because the indexation of rate brackets turned projected future surpluses into projected future deficits. Finally, starting in 1982, the legacy of special tax provisions led to cries for a level playing field that would treat similar taxpayers more equally and improve efficiency in the allocation of resources.

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  • Don Fullerton, 1990. "Inputs to Tax Policymaking: The Supply Side, the Deficit, and the Level Playing Field," NBER Working Papers 3507, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3507
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    1. Fullerton, Don, 1982. "On the possibility of an inverse relationship between tax rates and government revenues," Journal of Public Economics, Elsevier, vol. 19(1), pages 3-22, October.
    2. Fullerton, Don, 1987. "The indexation of interest, depreciation, and capital gains and tax reform in the United States," Journal of Public Economics, Elsevier, vol. 32(1), pages 25-51, February.
    3. Mervyn A. King & Don Fullerton, 1984. "West Germany," NBER Chapters,in: The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany, pages 149-192 National Bureau of Economic Research, Inc.
    4. Martin Feldstein, 1979. "Adjusting Depreciation in an Inflationary Economy: Indexing versus Acceleration," NBER Working Papers 0395, National Bureau of Economic Research, Inc.
    5. Alan J. Auerbach & James M. Poterba, 1987. "Why Have Corporate Tax Revenues Declined?," NBER Chapters,in: Tax Policy and the Economy, Volume 1, pages 1-28 National Bureau of Economic Research, Inc.
    6. Musgrave, Richard A, 1987. "Short of Euphoria," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 59-71, Summer.
    7. Fullerton, Don & Mackie, James B. III, 1989. "Economic Efficiency in Recent Tax Reform History: Policy Reversals or Consistent Improvements?," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(1), pages 1-13, March.
    8. Joel Slemrod & Nikki Sorum, 1984. "The Compliance Cost of the U.S. Individual Income Tax System," NBER Working Papers 1401, National Bureau of Economic Research, Inc.
    9. Pechman, Joseph A, 1990. "The Future of the Income Tax," American Economic Review, American Economic Association, vol. 80(1), pages 1-20, March.
    10. Don Fullerton & Marios Karayannis, 1987. "The Taxation of Income from Capital in the United States, 1980-86," NBER Working Papers 2478, National Bureau of Economic Research, Inc.
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