NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Inputs to Tax Policymaking: The Supply Side, the Deficit, and the Level Playing Field

Don Fullerton

NBER Working Paper No. 3507 (Also Reprint No. r1912)
Issued in September 1994
NBER Program(s):   PE

Although supply side theory may have been obvious to economists, it instigated a major change in the nature of tax policymaking through marginal rate cuts in both the Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986. Also, the 1981 bill was the culmination of an era in which policymakers could use expected revenue increases to enact rate cuts as well as special tax provisions. The deficit became a force in tax policymaking not only because of revenue losses from the 1981 bill, but because the indexation of rate brackets turned projected future surpluses into projected future deficits. Finally, starting in 1982, the legacy of special tax provisions led to cries for a level playing field that would treat similar taxpayers more equally and improve efficiency in the allocation of resources.

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Document Object Identifier (DOI): 10.3386/w3507

Published: Feldstein, Martin (ed.) American Economic Policy in the 1980s. Chicago: University of Chicago Press, 1994.

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