Fundamental Tax Reform

Fundamental Tax Reform

Issues, Choices, and Implications

Edited by John W. Diamond and George R. Zodrow

Foreword by James A. Baker, III

Leading experts on tax policy examine the complex issues involved in fundamental tax reform, including the relative merits of income-based and consumption-based taxation.





Leading experts on tax policy examine the complex issues involved in fundamental tax reform, including the relative merits of income-based and consumption-based taxation.

Reform of the federal income tax system has become a perennial item on the domestic policy agenda of the United States, although there is considerable uncertainty over specifics. Indeed the recent report of the President's Advisory Panel on Federal Tax Reform recommended not one but two divergent policy directions (and included extensive discussion of a third).

In Fundamental Tax Reform, top experts in tax policy discuss a wide range of issues raised by the prospect of significant tax reform, identifying the most critical questions and considering whether the answers are known, unknown—or unknowable. The debates over tax reform usually concern the advantages and disadvantages of income-based taxation as opposed to any of the several alternative forms of consumption-based taxation. The book opens with chapters that discuss the strengths, weaknesses, and political feasibility of these options. Other chapters consider the effect of tax reform on businesses, especially their investment behavior, and include a discussion of possible problems in any transition to a consumption-based tax; international taxation issues arising in an era of globalization; and individual behavioral response to tax reform, including a view of the topic from the perspective of the relatively new field of behavioral economics.

ContributorsRosanne Altshuler, Alan J. Auerbach, John W. Diamond, Harry Grubert, Arnold C. Harberger, Kevin A. Hassett, Thomas J. Kniesner, Laurence J. Kotlikoff, Edward J. McCaffery, Kathryn Newmark, David Rapson, Daniel Shaviro, Joel Slemrod, James P. Ziliak, George R. Zodrow

DiscussantsJames Alm, Henry J. Aaron, Charles L. Ballard, Leonard E. Burman, Robert S. Chirinko, Robert D. Dietz, Malcolm Gillis, Roger H. Gordon, Jane G. Gravelle, Timothy S. Gunning, James M. Poterba, Thomas S. Neubig, Alan Viard, George Yin


$49.00 X ISBN: 9780262042475 568 pp. | 6 in x 9 in 5 figures, 20 tables


John W. Diamond

John W. Diamond is Edward A. and Hermena Hancock Kelly Fellow in Public Finance at Rice University's James A. Baker III Institute for Public Policy.

George R. Zodrow

George R. Zodrow is Allyn R. and Gladys M. Cline Chair of Economics and Rice Scholar, Baker Institute for Public Policy, at Rice University.


James A. Baker, III.


  • Diamond and Zudrow have produced a timely book on fundamental tax reform that avoids revisiting old and tired issues, appeals to a broad policy-oriented audience, and draws leading scholars to comment on reform-related issues.

    Douglas Holtz-Eakin

    Senior Fellow, Peterson Institute for International Economics

  • This volume is required reading for anyone undertaking—or even considering—fundamental tax reform. The authors and discussants of the papers take a fresh look at important issues that many thought were settled.

    Charles McLure

    Senior Fellow Emeritus, Hoover Institution, Stanford University

  • Expiring tax provisions, concern over the Alternative Minimum Tax, and global competition in business taxation imply that major tax reform in the United States will be on the agenda for the next president. But which reform? This volume tackles tough questions in the effects of tax reform on business investment, asset prices, and U.S. competitiveness, and will be essential reading for economists writing on tax reform and for policy advisors.

    R. Glenn Hubbard

    Dean, Columbia School of Business


  • Winning entry, Professional Cover/Jacket Category, in the 2009 New England Book Show sponsored by Bookbuilders of Boston.