BASE-BROADENING TAX REFORMS. ESRI Research Bulletin 2010/2/4

Callan, Tim and Keane, Claire and Walsh, John R. (2010) BASE-BROADENING TAX REFORMS. ESRI Research Bulletin 2010/2/4. UNSPECIFIED.

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Abstract

At given levels of economic activity, increases in tax revenue require either higher tax rates or a wider tax base. Higher tax rates cause greater distortions to economic decisions, so widening of the tax base is preferred on efficiency grounds. But considerations of fairness and ability to pay are also relevant, as pointed out by Geary Lecturer, James Poterba: “There is often a trade-off between an efficient tax system which has a very broad base and low rates and a tax system which ....does not put substantial burdens on those with relatively low ability to pay”. (Poterba, 2010, p. 135) The balance between these considerations cannot be decided on a purely theoretical basis: careful analysis of particular proposals for widening of the tax base or changes in tax structure are needed. Recent research under the Institute’s programme for Taxation, Welfare and Pensions has helped to clarify the impact of alternative base-widening options in three areas: property tax, the tax treatment of pension contributions, and the tax treatment of child benefit. Brief summaries of the findings of each of these pieces of research are given here, and links to the full publications are to be found at the end of this article.

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