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

74 Pages Posted: 10 Oct 2007 Last revised: 10 Aug 2010

See all articles by Don Fullerton

Don Fullerton

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 1990

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.

Suggested Citation

Fullerton, Don, Inputs to Tax Policymaking: The Supply Side, the Deficit, and the Level Playing Field (November 1990). NBER Working Paper No. w3507. Available at SSRN: https://ssrn.com/abstract=471507

Don Fullerton (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
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National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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