英文会计论文.doc

FLAT TAXES AND EFFECTIVE TAX PLANNING MICHAEL CALEGARI * Abstract - Stiglitz (1985) shows that income deferral opportunities and differentially taxed economic activities provide incentives for investors to engage in tax avoidance strategies. In this paper, I describe several tax avoidance strategies that can be used by taxpayers in a Hall–Rabushka flat tax system to reduce or eliminate their tax liabilities. Effective tax planning continues to be viable in a flat tax regime because the idealized environment envisioned by the proposal does not consider taxpayers’ strategic response to the new system. These tax planning techniques can affect economic behavior, compliance and enforcement costs, and the distribution of the tax burden. INTRODUCTION Hall and Rabushka (1995) present a simple flat tax regime that eliminates many current sources of income and deductions. Their proposal has been embraced by many politicians and has been introduced as legislation in the U.S. Congress by Representative Dick Armey and Senator Richard Shelby. Its proponents claim that replacing the current income tax system with the flat tax will increase personal savings and business investment, reduce interest rates and compliance costs, and curtail incentives and opportunities for tax evasion and tax avoidance (e.g., Armey,1996; National Commission on Economic Growth and Tax Reform, 1996). In the current income tax system, taxpayers can successfully reduce their tax liabilities by engaging in effective tax planning. According to Stiglitz (1985), effective tax planning is based on three general principles: postponing taxes from the current period into future periods, arbitraging across different income streams facing different tax treatment (source-based arbitrage), and shifting income from high tax brackets to low tax brackets (rate-based arbitrage). By flattening tax rates, eliminating double taxation, removing distinctions between ordinary and capital gain income, and denying any offsets to