Simplifying Tax Simplification: An Analysis of Its Impact on the Profitability of Capital Investment

Abstract

* Tax simplification and reform is a concept that is very much a part of the current political climate in the United States. There are currently three tax simplification plans now receiving significant attention in Washington: the Fair Tax Plan sponsored by Senator Bill Bradley and Representative Richard Gephardt, the FAST Tax Plan sponsored by Representative Jack Kemp and Senator Robert Kastens, and the Tax Simplification Plan proposed by the Treasury Department. Three common themes pervade each of these plans. They are that the number of tax brackets should be reduced, marginal tax rates should be lowered on individual and corporate income, and the tax base at both the individual and the corporate level should be broadened. The authors of the plans argue that these changes would make the individual and the corporate income tax systems more equitable and more efficient. While the passage of a full-scale tax reform bill by Congress is by no means certain, it is probably a safe bet that many of the base broadening provisions for the