Tax Reform as a Discovery Process

14 Pages Posted: 4 May 2018

See all articles by J. R. Clark

J. R. Clark

The University of Tennessee at Chattanooga

Dwight R. Lee

Southern Methodist University (SMU) - O’Neil Center for Global Markets and Freedom

Date Written: January 3, 2018

Abstract

What is the best tax structure? Neither pundits and politicians nor economists can say for certain. Many have suggestions, but in reality there is no one tax system that will work for every state, let alone every municipality. The reason is simple: The broader policy environments underlying tax systems change over time. This chapter offers a radical tax reform proposal to address the impending state fiscal crisis. Key takeaways: (1) Federal taxation should be replaced with “Tiebout taxation,” where all taxes would be collected by the states and a uniform percentage of the state revenue would be given to the federal government. (2) Tiebout taxation won’t reveal the ideal tax code, but it will create fiscal incentives that will help by decentralizing the power to tax.

Keywords: tax subsidies, taxation, tax policy, Tiebout taxation

JEL Classification: H2, H7, H71

Suggested Citation

Clark, Jeff R. and Lee, Dwight R., Tax Reform as a Discovery Process (January 3, 2018). Excerpt from Adam J. Hoffer and Todd Nesbit, eds., For Your Own Good: Taxes, Paternalism, and Fiscal Discrimination in the Twenty-First Century. Arlington, VA: Mercatus Center at George Mason University, 2018.. Available at SSRN: https://ssrn.com/abstract=3173832

Jeff R. Clark (Contact Author)

The University of Tennessee at Chattanooga ( email )

Department of Economics
Suite 313 Fletcher Hall
Chattanooga, TN 37403-2598
United States

Dwight R. Lee

Southern Methodist University (SMU) - O’Neil Center for Global Markets and Freedom ( email )

United States

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