Effects of Tax Simplification Options on Equity, Efficiency, and Simplicity: A Quantitative Analysis

Jeffrey Rohaly and William G. Gale
William G. Gale The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Senior Fellow - Economic Studies, Co-Director - Urban-Brookings Tax Policy Center

May 1, 2003


Although pleas to simplify the tax system are ubiquitous, quantitative analyses of
simplification options are rare. This paper explores the effects of tax simplification
proposals on selected aspects of equity, efficiency, and complexity, using the Tax Policy
Center’s tax microsimulation model. We show that simplification proposals differ
dramatically with respect to their effects on revenue, distribution, marginal tax rates, and
indeed on simplification per se. As a result, a focus on simplification options does not
eliminate the need to make judgments regarding the distributional, efficiency, or revenue
consequences of tax changes.