The tax system profoundly affects countless aspects of private behavior. It is a powerful policy influence on the distribution of income and it is the one aspect of government that almost every citizen cannot avoid. With tax reform high on the political agenda, this book brings together studies of leading tax economists and lawyers to assess the various reform proposals and examine the effects of tax reform in several distinct areas. Together, these studies and comments on them present a balanced evaluation of professional opinion on the issues that will be critical in the tax reform debate. The book addresses annual and lifetime distributional effects, saving, investment, transitional problems, simplification, home ownership and housing prices, charitable groups, international taxation, financial intermediaries and insurance, labor supply, and health insurance. In addition to Henry Aaron and William Gale, the contributors include Alan Auerbach, University of California, Berkeley; David Bradford, Princeton University; Charles Clotfelter, Duke University; Eric Engen, Federal Reserve; Don Fullerton, University of Texas; Jon Gruber, Massachusetts Institute of Technology; Patric Hendershott, Ohio State; David Ling, University of Florida; Ronald Perlman, Covington & Burling; Diane Lim Rogers, Congressional Budget Office; John Karl Scholz, University of Wisconsin; Joel Slemrod, University of Michigan; and Robert Triest, University of California, Davis.

Papers presented at a conference held at the James A. Baker III Institute for Public Policy at Rice University, in Apr. 2006.

Tax experts across the political spectrum agree that the current rate structure is not rational and that potential gains from reform could be remarkable. Accordingly, tax reform is widely viewed as desirable. However, there is not a clear consensus on what reforms are most desirable or feasible. In Toward Fundamental Tax Reform, eleven leading tax scholars, including a Nobel Prize winner, outline their ideas about tax reform. The original essays provide readers with concise but varying perspectives on the possibilities of tax reform. They also focus attention on key questions in the scholarly debate: Would a different tax code dramatically alter the functioning of the economy? How much damage does the current law do? Can relatively small changes to the tax code deliver most of the benefits of more dramatic reforms like the flat tax? Are political forces that oppose efficient tax systems simply too powerful to overcome? Will tax reform inevitably harm the poor? Can a tax reform, if enacted, be sustained?

The book describes the difficulties of the current international corporate income tax system. It starts by describing its origins and how changes, such as the development of multinational enterprises and digitalization have created fundamental problems, not foreseen at its inception. These include tax competition—as governments try to attract tax bases through low tax rates or incentives, and profit shifting, as companies avoid tax by reporting profits in jurisdictions with lower tax rates. The book then discusses solutions, including both evolutionary changes to the current system and fundamental reform options. It covers both reform efforts already under way, for example under the Inclusive Framework at the OECD, and potential radical reform ideas developed by academics.

Transition costs surround debates over fundamental tax reform. Calculations of transition costs have followed the setup pioneered by Alan Auerbach and Larry Kotlikoff. In this volume, the authors focus on the most critical transition issues from the political perspective.