The Role of Administrative Factors in Tax Reform: Simplicity, Compliance, and Administration

US TAX REFORM IN THE 21ST CENTURY, Cambridge University Press

59 Pages Posted: 10 Nov 2003

See all articles by William G. Gale

William G. Gale

Brookings Institution

Janet Holtzblatt

Government of the United States of America - Department of the Treasury

Abstract

This paper examines the role of complexity, evasion, and administration in tax reform. We describe the features of tax systems that generate complexity and evasion and explore why, even though almost everyone agrees that taxes should be simple and perfectly enforced, no tax system appears to meet those standards. We describe structural and administrative changes that could significantly simplify the existing system. We show that a national retail sales tax would prove difficult, if not impossible, to administer because of high rates, tax evasion, and political pressure to exempt certain goods. The flat tax would be administrable, but would likely become significantly more complex than proposed due to political pressure to restore popular tax subsidies and reduce tax avoidance. Although it commands widespread support and is technically feasible, substantial tax simplification will prove difficult to achieve in the existing system or a new one.

Keywords: Tax administration, tax compliance, tax simplification, fundamental tax reform, national retail sales tax, flat tax, consumption tax, tax reform

JEL Classification: H20, H26

Suggested Citation

Gale, William G. and Holtzblatt, Janet, The Role of Administrative Factors in Tax Reform: Simplicity, Compliance, and Administration. US TAX REFORM IN THE 21ST CENTURY, Cambridge University Press. Available at SSRN: https://ssrn.com/abstract=257189 or http://dx.doi.org/10.2139/ssrn.257189

William G. Gale (Contact Author)

Brookings Institution ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-797-6148 (Phone)
202-797-6181 (Fax)

Janet Holtzblatt

Government of the United States of America - Department of the Treasury ( email )

1500 Pennsylvania Avenue, NW
Washington, DC 20220
United States
(202) 622-1327 (Phone)
(202) 622-0236 (Fax)

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