Abstract
In this paper we estimate the long run macroeconomic and interindustry effects of the tax simplification proposals as outlined in The President's Tax Proposal to the Congress for Fairness, Growth and Simplicity. We present two scenarios—Traditional and Supply Side—which incorporate alternative views of the effect of tax changes on aggregate savings. Our conclusions are that (1) in the long run, the cost of capital may be higher or lower depending upon the inflation rate; (2) the macro effects are extremely small under both the Traditional and Supply Side scenarios; (3) there will be substantial interindustry effects.
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