The Economics of Tax Reform

Abstract

The federal income tax is of central importance in both economics and politics. The income tax has been the mainstay of the federal government's revenue since the end of World War II. The income tax on individuals has consistently produced over 40 percent of total revenues for the last three decades. The income tax on corporations, while not as productive of revenue as it once was, still contributes about 10 percent of the total tax take. These large revenue yields make the income tax the main point of contact between the federal government and the broad population of typical American households, and perhaps also the dominant factor in people's attitudes toward the government as a whole.